Goldman Sachs has initiated coverage on Cholamandalam Investment & Finance Company (Chola Finance) with a “Buy” rating and a price target of ₹1,786, implying a 20% upside from its September 4 closing price of ₹1,487. The firm highlights Chola’s market share gains in the commercial retail space, boosted by the up-cycle in the sector.
One of the key drivers for Chola’s growth is its strategy to diversify into non-vehicle finance businesses, which will help reduce the cyclicality of its earnings and improve visibility on growth. Goldman Sachs expects Chola to deliver an EPS Compound Annual Growth Rate (CAGR) of 33% over FY24-FY27, with an improving Return on Assets (ROA) profile, adding 24 basis points over the period.
The firm cites several factors contributing to this growth, including the company’s capacity to diversify its loan book, a secured loan portfolio that provides high visibility on earnings, and operational leverage in new business segments. These factors are expected to drive robust loan growth across multiple product segments as the consumer retail credit cycle normalizes.
