Shriram City Union Finance Ltd. share price target

2QFY18 PAT declined 3% YoY to INR2.0b. Operating profit rose 20% YoY (3% beat), driven by strong loan growth and controlled opex. However, a sharp increase in credit costs (+71% YoY) weighed on the bottom line. Recovery has been slow post demonetization and rollout of GST. In the last four quarters since demonetization, non-gold disbursements grew at an average of only 4% YoY. Total disbursements were largely driven by MSME (+8% QoQ) and gold (4% QoQ). Disbursement growth in 2Ws was 3% QoQ. We forecast 12%/18% disbursements growth in FY18/19....

NIM improved marginally by 12bpsYoY to 13.83% majorly led by a fall in cost of funds by 76bps YoY to 9.31%. Yield on assets fell by 40bps YoY to 20.64%. Going forward, interest income reversals on account of migration to NPA recognition on 90-dpd basis will keep...

Q1FY18 PAT was in line at Rs 1.9 bn (up 7% YoY) with AUM growth of 17.5% YoY at ~Rs 241 bn. Cost of borrowings was down 10 bps QoQ to 9.3% (expect ~30 bps more reduction in FY18) that helped NIM improve to 13.8%, though incremental benefits may be passed on.

SCUF reported a weak Q4FY17 marked by sharp deterioration in asset quality and decline in margin, resulting in a significantly lower PAT (Rs 120 mn; down 78% YoY).

Asset Quality showed improvement with GNPAs decreasing by 47bps QoQ at 4.49% and NNPAs decreased by 57bps QoQ at 0.57% after considering the dispensation provided by RBI as the company continues to recognize NPLs on a 150-dpd basis. GNPA would stand increased at 5.4% had the relaxation given RBI was not taken in to account. As of 3QFY17,...

We have not made any changes to our estimates yet, and shall do so after Q3FY17 quarterly results by which time we shall have better visibility on aforementioned concerns. Our TP implies 15% upside from CMP of Rs 1,874, and the upgrade to BUY rating is driven solely by ~30% correction in the price o..

Asset Quality showed improvement with GNPAs decreasing by 15pbs QoQ at 4.96% and NNPAs decreased by 11bps QoQ at 1.35% as the company continues to recognize NPLs on a 150-dpd basis. Absolute GNPAs remained flat (1%QoQ) to INR 10.3bn, while NNPA...

SCUF 2Q performance positively surprised on various parameters (1) Disbursements growth of 23% was well spread across segments, (2) AUM growth of 18% (Ex. gold at 25%) was at 14-qtr high, (3) NIM jumped 34bps QoQ to ~14%, (4) Opex growth was moderate at 12.5%, (5) Stable asset quality across segments and (6) Coverage ratio further inched up to ~73%.

Portfolio re-alignment phase over; growth at inflection point: After growing its AUM at a 36% CAGR over FY07-13, SCUF went into consolidation mode, given the challenging macro environment. The management scaled down growth and re-aligned its gold loan portfolio in light of the tightening regulations for gold loan companies and the sharp volatility in gold prices. As a result, AUMs grew at a meagre 7% CAGR over FY13-16. This phase was marked by realignment of loan book away from gold and in favor of small enterprises and two...