Hold Sundaram Finance; target of Rs 2450: ICICI Direct

ICICI Direct recommended hold rating on Sundaram Finance with a target price of Rs 2450 in its research report dated February 25, 2021.

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ICICI Direct’s research report on Sundaram Finance

Sundaram Finance (SFL) is a Chennai-based NBFC with a presence in auto financing, home finance, asset management and general insurance business. Major value is derived from asset financing (vehicle financing) with AUM of Rs 31226 crore as of December 2020. The company has 583 branches with a substantial presence (~55%) in southern India.

Outlook

We expect healthy earning trajectory at 15-16% in FY21-23E and RoA to remain at 2.2-2.3%. Valuing the stock on an SOTP basis, we arrive at a target price of Rs 2450 (Rs 1920 earlier) but due to recent run-up in stock price, we downgrade our recommendation from BUY to HOLD.

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