Chola Finance surges 4% to reach all-time high following Goldman Sachs’ ‘buy’ rating

On September 5, Chola Finance achieved a remarkable milestone in the share market investment landscape. The company's stock surged by 4%, reaching an all-time high of Rs 1,797. This impressive gain came in the wake of Goldman Sachs initiating a 'buy' rating for Chola Finance, which has driven significant interest and confidence in the stock.

Goldman Sachs' positive outlook

Goldman Sachs analysts have provided a bullish forecast for Chola Finance, highlighting several key factors behind their optimistic view. They anticipate a substantial improvement in the company's Return on Assets (ROA) profile, supported by robust loan growth and market share gains. The analysts predict an impressive Earnings Per Share (EPS) Compound Annual Growth Rate (CAGR) of 33% from FY24 to FY27, reflecting strong future earnings potential.

Market performance comparison

Chola Finance's stock performance this year has notably outpaced the broader market. While the Nifty 50 index has risen by 16% year-to-date, Chola Finance's shares have surged by over 20%. This significant outperformance underscores the company's strong position and effective market strategies.

Quarterly results highlight the strength

The company's recent financial results further support the positive outlook. For the June quarter, Chola Finance reported a substantial 29.7% year-on-year increase in profit-after-tax, amounting to Rs 942 crore. Additionally, total income rose by 41% year-on-year to Rs 5,828 crore, and disbursements increased by 22% to Rs 24,332 crore in Q1 FY25. These figures reflect the company's strong financial health and growth trajectory.

Analyst endorsements and future projections

Supporting the positive sentiment, analysts at HDFC Securities have also maintained a favourable view of Chola Finance. They have issued an 'add' rating with a target price of Rs 1,500 per share. HDFC Securities highlights the company's ongoing product diversification beyond vehicle finance, expecting it to drive healthy loan growth and robust profitability. The anticipated Return on Equity (RoE) of around 20% is expected to be bolstered by efficiency gains, which will offset normalised credit costs.

Key takeaways

1. Record high achievement: Chola Finance's shares reached a new high of Rs 1,797 following Goldman Sachs' 'buy' rating.
2. Goldman Sachs' forecast: Chola Finance is projected to experience a 33% EPS CAGR from FY24 to FY27, driven by improving RoA and robust loan growth.
3. Market outperformance: Chola Finance has outperformed the Nifty 50 index this year, with a 20% rise compared to the index's 16% increase.
4. Strong quarterly results: Significant year-on-year growth in profit-after-tax, total income, and disbursements highlights the company's financial strength.
5. Future outlook: Analysts predict continued growth and profitability due to ongoing diversification and market expansion.