NBFC Stock Reported 44% PAT Growth In Q2 FY23, Axis Securities Assigns Buy Call

Axis Securities has picked NBFC sector stock, Sundaram Finance Ltd (SUF) for investment. The analyst has assigned a target price of Rs 2605 apiece. The current market price of the stock is Rs 2304 and if you buy shares of Sundaram Finance, you will get potential 13% upside. The large cap company has a market capitalisation of Rs 25,608 crore. Check key takeaways below:

1. Sundaram Finance Ltd Stock Performance & Return

The last trading price of the stock is Rs 2304 apiece with an intraday gain of 0.27%. The stock's 52-week high is Rs 2485 apiece and 52-week low is Rs 1557 apiece, respectively. The stock has rallied 41% in last 3-years and 24% in last 5-years.

2. Sundaram Finance Q2FY23 Performance

The company's Q2FY23 reported robust performance beating our expectations with NII growing 2.4% YoY to Rs 623 Cr and 17.3% QoQ. PPOP grew by 21.9% QoQ but declined marginally by 3.9% YoY. The company reported robust PAT growth of 44.1% YoY owing to the lower base of Q2FY22. It was up 34.5% QoQ, led by healthy growth in NII and reduced provision. SUF reported disbursements at Rs 5,139 Cr (up 41.9 % YoY), leading to AUM growth of 7.3% YoY. Barring the impact of the RBI circular on the NPA recognition, G/NNPA for Q2FY23 moderated QoQ from 2.51%/1.3% to 2.54%/1.37%. Restructured pool improved QoQ to 2.9% from 4.07% and the collections in this book are holding up well.

3. Restructured Book Improved

There was a significant improvement in the outstanding restructured book to Rs 927 Cr (2.9% of loans) from Rs 1,234 Cr (4.07% of loans) in Q1FY23. The management expects the continued recovery in the commercial vehicles segment, especially medium & heavy commercial vehicles.

4. Valuation

According to Axis Securities, "With robust disbursement growth due to a pick-up in heavy and medium CV, the company's C/I ratio to normalize at 32-33%, comfortable capital position and robust asset quality, will allow SUF to continue its growth momentum going forward. With the growth levers intact, We maintain our BUY rating with a revised target price of Rs 2,605/share (based on SOTP valuation), implying an upside of 11.5% from the CMP."

5. About Sundaram Finance Ltd

Sundaram Finance was established in 1954 when Sri T. S. Santhanam, the Founder, envisioned the future of hire-purchase finance in India. The company was started with a paid-up capital of Rs. 2 Lakhs and promoted by Madras Motor & General Insurance Company which was then one of the leading insurance companies in India prior to nationalisation in 1971.

Today, Sundaram Finance Limited has a diversified presence in Mutual Funds, Housing Finance, General Insurance, IT, Business Process Outsourcing and Retail Distribution of a wide array of financial services and products, according to its official website.

Disclaimer

The stock has been picked from the brokerage report of Axis Securities. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.