HDFC Securities maintains Reduce call on Sundaram Finance; target price Rs 4,410

HDFC Securities has maintained a Reduce call on Sundaram Finance with a revised target price of Rs 4,410. The current market price of Sundaram Finance is Rs 5,180. Sundaram Finance, incorporated in 1954, is a Large Cap company with a market cap of Rs 57579.58 crore, operating in the NBFC sector.

Sundaram Finance's key products/revenue segments include Interest, Dividend, Fees & Commission Income, Lease Rentals, Income From Sale Of Share & Securities, Bad Debts Recovery and Other Services for the year ending 31-Mar-2024.

Financials

For the quarter ended 31-03-2025, the company has reported a Consolidated Total Income of Rs 2300.22 crore, up 4.21% from last quarter Total Income of Rs 2207.35 crore and up 6.63% from last year same quarter Total Income of Rs 2157.27 crore. The company has reported net profit after tax of Rs 553.53 crore in the latest quarter.

The company's top management includes Mr.S Viji, Mr.R Venkatraman, Dr.Kshama Fernandes, Mrs.Bhavani Balasubramanian, Mr.R Raghuttama Rao, Mr.L Ganesh, Mr.S Mahalingam, Mr.T T Srinivasaraghavan, Mr.Srivats Ram, Mr.A N Raju, Mr.Rajiv C Lochan, Mr.Harsha Viji, Mrs.Anuradha Rao. Company has B K Khare & Co. as its auditors. As on 31-03-2025, the company has a total of 11 crore shares outstanding.

Investment Rationale

Sundaram Finance (SUF) reported a steady set of earnings with sustained reflation in NIMs and muted provisioning (-1bps), offset by lower other income. AUM growth marginally moderated further to +17% YoY (Q3FY25: 19% YoY; FY24: +27% YoY), driven by subdued disbursements (+11% YoY; +9% YoY for FY25) across segments, except cars and CE segments. Disbursement uptick remains a key monitorable as the overall CV and PV cycles remain soft. SUF?s product diversification strategy and interest rate reduction environment are likely to aid further reflation in NIMs. While SUF remains a pristine franchise with steady growth and profitability metrics (core RoE of 19% for FY25), current valuations provide limited upside amidst growth headwinds. HDFC Securities expects moderation in loan growth over FY26-FY27E (16% CAGR vs. 20% CAGR over FY23-FY25). The brokerage has tweaked its FY26E/FY27E earnings estimates for lower cost of funds and maintain a REDUCE rating with a revised SoTP-based target price of Rs 4,410 (standalone entity at 3.4x Mar-27 ABVPS; 17% discount to CIFC).