Sunday, November 19, 2017

Ceejay Finance Ltd (BSE Code: 530789) (CMP: Rs.155.55) (FV: Rs.10)

Gujarat-based Ceejay Finance Ltd (CFL) is registered as an Asset Finance Company – XD NBFC with the Reserve bank of India and is a leading player in Retail Finance since 1993. It is an integrated finance company that provides financial services and specializes in loans for 2-Wheelers, 3-Wheelers, 4-Wheelers, pre-owned and commercial vehicles. With growing business opportunities, it has diversified its finance business to include SME Business Loans, Loans against Property (LAP), Personal Loans, Micro Finance Loans (since 2015). It also acts as an insurance service provider for General Insurance to its clients.

We had recommended this stock at Rs.125 here in July 2017. But the stock looks attractive for the long-term even at the current level based on the excellent Q2 results posted by the company. In spite of demonetisation and GST, CFL posted a healthy top-line and bottom-line on an annual basis and better-than-expected numbers on a quarterly basis.

CFL is likely to report a better quarter going ahead with the rural economy showing signs of recovery on the back of a good monsoon, recovery in sale of farm equipments as well as recovery in the overall economy. Gujarat witnessed record-breaking numbers for 2-Wheeler sales during the Dussehra and Diwali festivals this year and CFL is a leading player in this segment. Even during the forthcoming state elections, a good demand for 2-Wheelers is anticipated.

The CFL stock trades at a P/E of 9.60x on FY18E EPS of Rs.18-20 compared to the industry P/E of over 43.78x. Its RoE and RoCE stand at 14.5% and 25.3%.

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