Sundaram Finance hits 52-week highs on the back of robust Q4 results

Shares of Sundaram Finance Ltd jumped 2 percent following robust Q4 results. At 1:36pm, the stock was trading 1.11 percent high at Rs 2540.01 on the NSE.

Sundaram Finance’s consolidated net profit grew 16 percent to Rs 1,500 crore (Rs 1,296 crore), while consolidated revenues stood at Rs 5,476 crore (Rs 5,108 crore). The consolidated figures include results of standalone subsidiaries, Sundaram Home Finance, Sundaram Asset Management, and joint venture company, Royal Sundaram General Insurance.

Sundaram Finance logged its highest-ever annual disbursement besides achieving over Rs 1,000 crore in net profit from ordinary business in FY23. The Chennai-based non-banking finance company (NBFC) recorded a 58 percent year-on-year growth in disbursements to Rs 20,966 crore in the previous fiscal, against a disbursement of Rs 13,275 crore in FY22. The company declared a final dividend of Rs 15 per share in addition to Rs 12 of interim dividend for FY23.

Addressing a press conference, Rajiv C Lochan, Managing Director, Sundaram Finance, said the record disbursements across its asset classes and geographies came after three challenging years, starting with a slowdown in commercial vehicle sales and followed by two years of Covid pandemic.

Of the total disbursements, the share of medium and heavy commercial (M&HCV) financing accounted for 31 percent, followed by passenger cars (24 percent), retail commercial vehicles (17.7 percent), and construction equipment (10.8 percent).

The total assets under management recorded a year-on-year growth of 17 per cent to Rs 34,552 crore as of March 2023, against Rs 29,532 crore at the end of March 2022. The lender’s net profit grew by 20 per cent to Rs 1,088 crore (Rs 903 crore) during the previous financial year. “This is the first time, excluding exceptional items, we recorded Rs 1,000 crore-plus profit number. That is another milestone for us,” added Lochan.

The company’s total revenue from operations grew 5 percent in FY23 to Rs 4,046 crore (Rs 3,870 crore), while expenses dropped marginally to Rs 2,690 crore (Rs 2,714 crore) during this period. Gross Stage 3 assets improved to 1.66 per cent as of March 2023, from 2.19 per cent as of March 2022. Stage 3 assets are loans that are overdue for more than three months.

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The lender’s gross non-performing assets (NPA) stood at 3 per cent as of March 2023, against 2.1 per cent as of March 2022. However, Lochan said the gross NPA figures during the two periods are not comparable since the latest NPA figures are arrived at as per RBI’s new asset classification norms for NBFCs, while the NPA for the previous period is as per the old norms. On a quarterly basis, the company’s standalone net profit grew by 6 per cent yoy to Rs 316 crore (Rs 299 crore) in Q4 FY23, while revenue from operations went up to Rs 1,054 crore (Rs 940 crore).

Brokerage Targets

Centrum Broking has given a ‘buy’ rating on the stock with a target price of Rs 2,862 indicating a potential upside of 14 percent from the current levels. The brokerage firm further added, “Sundaram Finance (SUF) reported AUM of Rs 345.5bn, up 17 percent/3 percent YoY/QoQ. Disbursement at Rs52.6bn in 4QFY23 and Rs210bn in FY23 was up 40 percent/58 percent YoY. Earnings (4QFY23) at Rs 3.2bn (up 6 percent YoY and 30 percent QoQ), was 17 percent ahead of our estimates. This was achieved despite NIMs (on AUM) compression of 47bps/30bps YoY/QoQ to 5.06 percent. Opex was controlled with Cost to Income ratio at 31.4 percent in 4QFY23, vs 35 percent in 4QFY22 and 35.6 percent in 3QFY23. “

Brokerage firm B&K Securities whereas has given a ‘hold’ rating on Sundaram Finance. The target price given by the firm is Rs 2680 per share.

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