Cholamandalam Investment and Finance Company Ltd (Chola) shares surged 3% today after UBS upgraded the stock to a ‘Buy’ and raised its target price to ₹1,950. The global brokerage highlighted Chola’s strong growth outlook, robust profitability, and improving asset quality as key drivers behind the bullish call. As of 9:23 AM, the shares were trading 2.38% higher at Rs 1,603.70.
UBS forecasts a 24% compound annual growth rate (CAGR) in assets under management (AUM) and a 30% CAGR in earnings per share (EPS) over FY25–27E. The momentum is expected to come from sustained growth in vehicle finance, MSME lending, and newer business segments.
UBS noted that Chola offers the best mix of growth and return on equity (RoE) in India’s financial services sector. The brokerage believes AUM growth will likely sustain at 25% CAGR, supported by multiple growth levers. Additionally, credit costs are expected to have peaked in FY25, providing room for improved profitability.
As funding costs stabilize and asset quality trends upward, UBS expects return on assets (RoA) to reach 2.5% by FY27, compared to 2.3% estimated for FY25. Reflecting this positive outlook, the firm has raised FY26 and FY27 EPS estimates by 2% and 3%, respectively, on account of lower funding costs and moderated credit risks.
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