Sundaram Finance Shares: Buy Sundaram Finance, Target Price Rs 2630: HDFC Securities

Securities have a buy call on . with a target price of Rs 2630. The current market price of Sundaram Finance Ltd. is Rs 2341.8.

Sundaram Finance Ltd., incorporated in 1954, is a large cap company (with a market capitalization of Rs 26246.62 crore) operating in the NBFC sector.

Sundaram Finance Ltd.’s key product/income segments includes interest, fee and commission income, dividends, income from the sale of shares and securities, lease rentals, other services and bad debt collection for the year ended March 31, 2022.


For the quarter ended 30/09/2022, the company reported total consolidated revenue of Rs.1,339.61 crore, an increase of 6.94% from total revenue of Rs.1,252.67 crore in the last quarter and an increase of 3.13 % from the total return of the same quarter last year of Rs.1,298.99 crore. The company reported net profit after tax of Rs. 280.97 billion in the last quarter.

justification for the investment
SUF’s Q2 2023 earnings were ~15% ahead of our estimates due to lower borrowing costs (36 basis points) and strong other income. Business momentum continued strongly, with payout growth of +42% yoy (+5% yoy) driven primarily by the CV portfolio (+59% yoy), in line with industry trends. Asset quality remains robust with GS-II/NS-III at 2.5%/1.4% (IRAC GNPA/NNPA at 4.3%/3.0) while the restructured book fell sharply to 2.9% ( Q1FY23: 4.1%). Derived spreads contracted 30 basis points QoQ and are likely to remain under pressure in a rising interest rate environment. Continued efforts to diversify portfolio across geographies (outside South at 43.4% of assets under management vs. 39.7% in Q2FY22), products (non-CV portfolio at 54% and increasing focus on ICV/SCV segments within CVs) and classic cars (used vehicles at 19.2% of payouts) remain on track to drive portfolio growth. Brokerage optimizes FY23/24 earnings to reflect higher other income offset by NIM compression; BUY with a revised SoTP-based price target maintained at INR 2,630 (standalone unit at 2.5x ABVPS ​​as of 24th September).

Promoter/FII holdings
Promoters owned 38.49 percent of the company as of March 31, 2022, while FIIs owned 9.91 percent and DIIs owned 14.27 percent.

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