Target: ₹5,113
CMP: ₹4,772.75
Sundaram Finance (SUF) has delivered a good performance in Q2FY26 with highest ever disbursement growth in a quarter (18 per cent y-o-y and 11 per cent q-o-q), positioning SUF well for stronger AUM growth in H2-FY26. Calculated NIMs expanded by 46 bps y-o-y and 7 bps q-o-q, supported by a 19 bps reduction in CoF.
PPOP, however, declined 12 per cent q-o-q, largely due to lower non-core income. Credit costs stood at ₹117 crore (up 50 per cent y-o-y, down 26 per cent q-o-q), reflecting some pressure from asset quality as GNPA/NNPA rose to 2.80/1.79 per cent (vs 2.66/1.71 per cent in Q1-FY26). PAT came in at ₹394 crore, up 15 per cent y-o-y but down 8 per cent q-o-q , supported by healthy core income growth.
Management remains optimistic, citing improving rural sentiment following a good monsoon and expectations of higher consumption post-GST cuts. Against this constructive backdrop, we project AUM, PPOP and PAT to grow at a CAGR of 15.5 per cent, 16.5 per cent and 14.3 per cent, respectively over FY25–28E, with RoA/RoE reaching 2.7/15.3 per cent by FY28E.
We maintain our Neutral rating on the stock albeit revise our valuation multiple upward to 4.0x (from 3.5x – still below mean plus one SD) on 1HFY28E ABV for the standalone business, to factor in sectoral tailwinds and traction on disbursement figures. Including subsidiaries at ₹1,083, post a 20 per cent holdco discount, we derive a revised TP of ₹5,113 (previous TP: ₹4,546).
Published on November 4, 2025
