UBS has upgraded Cholamandalam Investment and Finance Company to a ‘Buy’ rating and increased its target price to ₹1,950, citing the company’s robust growth outlook and improving profitability indicators.
In its latest note, UBS stated that Chola Investment offers the best combination of growth and return on equity (RoE) within the financial services space. The brokerage forecasts a 24% compound annual growth rate (CAGR) in assets under management (AUM) and a 30% EPS CAGR over FY25–27E, driven by continued momentum across vehicle finance, MSME lending, and new business segments.
UBS believes Chola has multiple levers in place to sustain AUM growth at 25% CAGR, while credit costs have likely peaked in FY25. With funding costs stabilizing and asset quality improving, the brokerage expects return on assets (RoA) to improve to 2.5% by FY27, compared to an estimated 2.3% in FY25.
Reflecting its more optimistic outlook, UBS has raised its FY26 and FY27 EPS estimates by 2% and 3%, respectively, factoring in lower cost of funds and moderated credit cost assumptions.
Disclaimer: The above views are of the broker’s and not the author or the publication’s. Please make any and every investment decision after consulting your financial advisor.
