Emkay Global Financial is bullish on Shriram Transport Finance Company has recommended buy rating on the stock with a target price of Rs 1455 in its research report dated January 28, 2021.
Broker Research
February 02, 2021 / 03:37 PM IST
Emkay Global Financial’s report on Shriram Transport Finance Company
Our preference for SHTF during current uncertain times is backed by their unique customer base with a moat and certainty in demand for used vehicle. SHTF has reported robust growth in disbursements to Rs125.3bn (+94% qoq, +9.9% yoy), which is ~60% higher than our and Street estimates. The company reported a PAT of Rs7.27bn, aided by improving margins (calc. NIMs of ~761bps), consistency in operating leverage (C/I ratio at ~23.4%) and steady credit costs (~236bps). Provision coverage improved further to ~41.2% with proforma GNPAs declining to 7.11% from 7.26% during last quarter. Covid-specific provisions were maintained at Rs25.1bn, built in through elevated loss given defaults assumptions across buckets. SHTF saw further improvement in collection efficiency to ~104% in Dec’20 from ~95% in Sept’20. Restructured loans stand at Rs3.1bn (~0.3% of AUM) but may rise up to ~3% of portfolio.
Outlook
We raise our FY22/23E earnings by ~26.2%/23.3%. SHTF remains one of the top picks from our NBFC coverage. We maintain our Buy rating (OW in EAP) on the stock with a revised TP of Rs1,455 (Rs800 earlier), corresponding to 1.4x P/Adj Book for FY23E.
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