Shriram City Union Finance Ltd. share price target

Shriram Group is one of the largest financial conglomerates significant presences in small enterprising financing, commercial vehicle financing business, retail finance, life and general insurance, stock broking, chit funds and distribution of financial products. The group is also present in businesses such as property development, engineering projects and information technology.

They initiate coverage on Shriram City Union Finance Ltd as a BUY @2100 with an immediate target of Rs 2350 representing a potential upside of 12% from the buy price. Shriram City Union is trading at a PE of 24.64.

growth and healthy NIMs. We expect the growth to pick up pace over FY17/18 as the companybuildsontheexpertiseithasgainedinnontraditionalmarkets.AtCMP,thestock tradesat2.3xFY18BVwithRoAof2.8%andRoEof14%.MaintainBuywitharevisedprice...

SCUFs 1QFY17 performance was on track with disbursements at a 15-quarter high at 27%, driven by strong growth across segments. AUM growth ( 17% YoY) was driven by core segments 2W ( 22%) and SME ( 20%). With 80bps QoQ NIM improvement and 8% decline in opex (C-I down 650bps), PPOP grew ~21%.

Borrowings of the company increased by 17.7%YoY to INR 148bn with the overall weighted average tenor to 22.09 months as against 20.8 months in the previous year. The total share of borrowings on floating rates, Semi-fixed & Fixed stands at 48.6%, 6.8% & 44.6% respectively as of 1QFY17. The company passed a resolution to increase borrowing to INR 300bn. However,...

SCUF's, AUM grew (17.1%YoY, 2.9%QoQ) to INR 195bn in 4QFY16 supported by growth in SME (19.3%YoY, 2.9%QoQ), Two Wheeler (17.1%YoY, 9.0%QoQ) and Loan against Gold (10.6%YoY). Management expects strong growth of ~18% for SME and 2W segment, while off balance sheet...

SCUFs shift to 150DPD weighed in on 4Q earnings by ~Rs 1.77bn, of which income de-recognition accounted for Rs 300mn while Rs 1.4bn was for higher provisions. GNPAs at Rs 9.8bn (5.2%) zoomed 55% QoQ and NNPAs (Rs 3bn, 1.6%) more than doubled. As SCUF maintained relatively higher PCR at 70%, provisions jumped ~2x QoQ.

AUM growth remained stable at 17%, aided by 18% growth in SME and 16% growth eachintwowheelerandgoldloansportfolios. 8 Assetqualitydeteriorated(expected)withGNPArisingto5.2%from3.4%inQ3,asthe...

Background: Shriram City Union Finance (SCUF), the retail finance arm of the Shriram Group, offers diversified loan products ranging from low risk (loan against gold) to high risk segments (small business loans and two-wheeler financing). Strong group parentage (three decades expertise in the finance services space) is among the key positives. The company benefits from Shriram Chits' branch infrastructure and existing customers, deriving more than 85% of its business from...

SCUFs performance was on track with healthy disbursements (ex-gold 17%) and AUM growth (~18%, 11-quarter high), which was evenly spread across segments except autos (-13% YoY). Led by a decline in CoF (change in borrowing mix) and better portfolio mix, NIM jumped ~45bps QoQ to ~14%. NII ( 14% YoY) was also in line with estimates. However, with controlled opex (9%) and stable provisions, PAT ( 22%) was ~13% ahead of estimates.

8 Increase in operating expenses moderated to single digits vs. the high doubledigit increase seen in the last 22 quarters, driving improvement in cost ratio. Improved employeeproductivityinnonchitregionswilldrivefurtherimprovementincostratios....