Prabhudas Lilladher recommended accumulate rating on Shriram Transport Finance with a target price of Rs 1386 in its research report dated January 29, 2021.
Broker Research
February 04, 2021 / 06:53 PM IST
Prabhudas Lilladher’s research report on Shriram Transport Finance
SHTF performance stood robust across most key parameters (GNPA down 15bpsQoQ/160bpsYoY to 7.1% exclusive of SC order, disbursements up 10.5%YoY/95%QoQ) for Q3FY21. While cyclical recovery led by replacement demand pick up for used CV financing should augur well for SHTF going forward, we would closely monitor borrower behavior (more than 1 installment payment, full payments, restructured accretion). With operator’s profitability yet to revert to pre-COVID levels, certain stressed segments (aggregators/others) resulting into delinquencies would imply a plausible 150bps expansion in restructured book. Although Co. did provide 40% on the same. We reckon write-offs led asset quality improvement with utilization of existing provision buffers should be the way ahead. To that effect, we marginally prune down our credit costs estimates to 2.76% (earlier 2.9%) for FY21 resulting in EPS upgrade of 12%. Credit costs for FY21/23 stands maintained at ~2% and hence no major changes to EPS for the same period. We maintain our AUM forecasts at 6.5% for FY21 and 10%-14% over FY22-23.
Outlook
However, we reiterate ACCUMULATE rating on the stock underpinned by certain overhangs such as bank license interest, merger talks on back-burner and sustainability of stable asset quality. Hence, we value SHTF at 1.4x PABV Mar’23E and price target stands unchanged at Rs1,386.
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