Prime Stock Recommendation: A five-decade vehicle finance company with superior risk-reward
A steady compounder in vehicle finance, backed by decades of prudent risk management.
N V Chandrachoodamani
Chandrachoodamani started his capital market career in mid 2000s with Equity Intelligence India and then worked with several capital market Intermediaries in various roles over the last 15 years. Most of his career experience has been in equity research and PMS. Most recently, he was with MOAT, a PMS firm. He is a graduate in mathematics, a post graduate in finance, and holds a CFP certification. LinkedIn|Twitter
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8 thoughts on “Prime Stock Recommendation: A five-decade vehicle finance company with superior risk-reward”
Nicely explained as usual.
If one has to pick between Aptus or Sundaram which one would be better? They are both currently available at similar P/B ?
Thank you.
Welcome your query, sir
That is a good question
If we look at the past, the only Housing Finance Co that exhibited superior metrics other than HDFC for long was Gruh Fin.
And the second one was Can Fin Homes.
And Can Fin is doing everything possible to ensure that it can lend ~70% to salaried class (forte of banks) and still operate at 2-2.5% RoA consistently in the long term. Can Fin is fetching just above 2 times book valuation and that is the best it could get
For Aptus kind of Affordable HFCs, they are able to operate at a higher yield segment with-out much credit losses now and so market is giving 3-4 times book now. While the demand for low to middle income housing in India will be there for long, the key question here is how long will they be able operate at a low credit cost (or loan write-off) in this space
As you know, the entire AHFC is occupied by PE funded players with <10 yrs history now
We chose Aptus because 1) cluster model to deeply understand each market 2) centralised underwriting in each State
3) Promoter stake is somewhat there Vs others and the Promoter himself coming from a deep South market understanding
(Don't mistake for high RoA of Aptus as it is due to high CAR and low interest outflow. Normalised RoA will be 3-4% only)
So, it was like betting on an opportunity that is likely to exist for long and on a management that looks good. The outcome will have to be closely watched.
Sundaram on the other hand comes with a track-record and the outcome is more or less certain and with significant promoter stake.
Both carries different risk-reward
One who is ready to take a bit more risk to achieve better returns can tilt towards Aptus
Hope this clarifies
Thank you
Sir – I personally would prefer if Prime Investor / advisor recommends 5-6 stock for long term holding. With so many recommendations for Buy, Hold, we would ourselves become a Mutual Fund.
So if there is a basket of 5-6 stocks where PI has the most conviction – that can be held for long term, it could be an offering from your side.
Hi Chandra,
Very good information on Sundaram.
How do you see Shriram here? Lower valuations and its other businesses (other than CV) should be an accelerator to Shriram?
Welcome your query sir.
Yes, Shriram is also doing well. On risk profile, it sits a tad higher with Used CV being its forte. At times, the segment has exhibited lot of volatility in asset quality.
On other segments, MSME is one with similar risk profile as its Used CV (on credit cost) and so it is value accretive merger only for Shriram with a straight growth run-way. Only 2 Wheeler has been a shaky segment for NBFCs, but it is small now.
Sundaram Finance is conservatively building its book and also the diversification initiatives giving a sense of more favourable risk-reward.
Hope this clarifies
Thank you
Okay. Thanks Chandra..
I would like to suggest that the name of the stock being recommended figure prominently on the title of the article. Here is a better way to do this. “Prime Stock Recommendation: Sundaram Finance – A five-decade vehicle finance company with superior risk-reward.”
This makes it easy for the reader to understand what the recommendation is. In this article, it takes until the third paragraph to understand the stock that is being recommended. Your technical analysis is brilliant, I am just suggesting a very minor change to make this more effective.
I understand and your request is straightforward. But our reason is very simple. The article is in the website and also goes to non-subscribers (though they cannot read it). So the title cannot be a give away:-) It has to tease people into subscribing 🙂 Content is also our marketing tool end of day 🙂
Comments are closed.