Buy Sundaram Finance; target of Rs 2030: Centrum Research
Centrum’s research report on Sundaram Finance
We retain Buy on Sundaram Finance (SUF) with SOTP based TP at Rs2,030. Q2’18 results beat our estimates on all fronts – higher than expected earnings; strong disbursement / AuM growth and stable asset quality. Housing business too saw growth accelerate with Q2’18 disbursements up 18.4% YoY. Other subsidiaries remain profitable. Strong capital position, best-in-class asset quality and superior returns profile remain key strengths for SUF. Value un-locking through demerger of non-financial investments into a separate entity could lead to further upside. Prefer Sundaram Finance in the NBFC space.
Q2’18 result beat our estimates on all fronts; we expect momentum therein to continue and have tweaked our estimates to that extent for FY18E/FY19E. In our recent note we had argued for premium valuations for Sundaram Finance, we see that continuing. Retain Buy with SOTP based TP at Rs2,030 (vs. earlier Rs2,000). Value un-locking in the non-financial investments through the demerger process into a separate entity (and subsequently listing of the entity) could add ~10% to our existing SOTP. Key risks: Lower than expected growth or inability to contain NPA’s at current level.
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