Sundaram Finance Q3 Results Review - AUM Growth Remain Strong; Asset Quality Improved: IDBI Capital

IDBI Capital's Report

Sundaram Finance Ltd.'s assets under management growth remain strong at 26% YoY led by all-time high disbursements (up 27% YoY 9M FY24). Company has gained the market share in all asset classes and geographies of operations which resulted strong growth. Asset quality has improved further led by improvement in collections; continues to remain best in-class asset quality. Collections have reverted to pre-Covid levels to 92%.

Net interest margin security have declined due to increase in cost of funds which resulted in lower net interest income growth (up 14% YoY). Profit after tax grew by 24% YoY led by decline in provisions (down 42% YoY). Thus, return on assets sustained at 2.8% (9M FY24) versus 2.8% YoY.

We have moved to FY26E and maintain our 'Buy' rating on Sundaram Finance with revised target price of 4,400 (earlier 3,870) valuing the parent business at pre-Covid average 4.3 times FY26E Core adjusted book value as growth and profitability back to pre-Covid levels.

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