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Technical Outlook

• The BFSI space has outperformed in CY22 while NBFCs are now catching up amid signs of interest rates nearing its peak. Sundaram Finance’s share price has given a falling channel breakout signalling end of its 15 month corrective phase and resumption of uptrend

• From a structural point of view, the share price has retraced its 2020-21 rally (982-2868) by 61.8% over 15 months indicating slower retracement that augurs well for long term price structure

• We expect the share price to gradually head towards | 2890 which is its CY21 high and remains good proxy for CV financing space

Fundamental Outlook

• Sundaram Finance (SFL) is a Chennai-based financial group with a presence in auto finance, home finance, asset management and general insurance. Major value is derived from its vehicle financing business with AUM of | 30,552 crore as of June 2022, though non-auto business are profitable and with optimistic outlook

• Improving industry outlook coupled with focus on gaining market share to aid business growth. Further, expanding geographic footprint in non-southern regions and growing new areas of focus – lending to MSMEs, small NBFCs and leasing business will propel disbursements ahead

• Margins could remain volatile in near term. However, improvement in operating leverage and lower credit cost is seen aiding RoA ahead of 2.5% in FY23- 24E. Sustained business growth in subsidiaries to further aid valuations. Thus, we remain positive on the stock

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