Shriram Finance Ltd. share price target

Standalone PAT of Shriram Transport Finance Company's (STFC) was way below ours and street expectations due to 153% yoy and 104% qoq rise in provision expenses that stood at Rs8.6bn. Higher provisioning was primarily due to movement towards 150 day NPA recognition and providing for merged equipment finance loan book. Notwithstanding shifting of GNPA recognition criteria to 150 days from 180 days earlier and merging highly-stressed equipment finance loan portfolio, STFC's gross NPA ratio rose to 6.2% in Mar'16 compared to 4.3% in Dec'15. Relatively lower rise in gross NPA than our expectation and earlier management guidance as well has surprised us positively. Its...

SHTF's 4QFY16 PAT de-grew 54% YoY & 62% QoQ to INR1.43b (49% miss). While the operating profit was in-line with expectation; higher provisions of INR8.6b v/s est. of INR6.1b- led by migration to 150dpd NPL reporting norms...

SHTFs 4Q earnings include the merger of the CE subsidiary (for FY16) and thus, are not comparable. The merger added AUM of Rs 16.3bn (2.2% of total) and GNPAs of Rs 8.9bn, i.e, 23% of total NPAs and 1.2% of AUM. The 150DPD shift weighed on earnings by ~Rs 3.2bn, incl. Rs 156mn for interest reversals.

Modest growth; Concerns persist over asset quality Shriram Transport Finance's (STFC) standalone PAT was although marginally above our expectation, nevertheless STFC continued to disappoint on asset quality front. Operating profit grew by 24.4% yoy and 8.8% qoq to Rs9.7bn led by healthy NII growth. However, bottom line growth remained under pressure due to higher provision expenses (+30.7% yoy and +5.3% qoq to Rs4.1bn). Gross NPA ratio at standalone level increased to 4.3% in 3QFY16 v/s 4.2% in 2QFY16 and 3.6% in 3QFY15 as excess rain fall impacted STFC's portfolio in few southern states....

SHTFs earnings were higher than estimate, with AUM growth (17%) at a nine-quarter high and NIM improvement for the seventh consecutive quarter - to 7.5%. With continued elevated provisions, PCR was maintained at healthy levels of ~80% . Improving growth trends in urban regions led to growth in the HCV/PV segment. GNPAs jumped ~8% QoQ, while NNPAs were flat QoQ.

9 Ahead of expectation led by higher AUM growth and improvement in NIMs. While growthinHCVsegmentremainedhealthy,passengerandtractorsegmentssawsharp pickup.Itgainedmarketshareintheusedtractorsegment....

9 Ahead of expectation led by higher AUM growth and improvement in NIMs. While growthinHCVsegmentremainedhealthy,passengerandtractorsegmentssawsharp pickup.Itgainedmarketshareintheusedtractorsegment....

SHTFs results were in line with estimates driven by a seven-quarter high AUM growth of 14% and sixth quarter of NIM (7%) improvement. Disbursements were at 17% with improving HCV and PV demands in urban areas. Weak monsoon and slowdown in the rural market took a toll on asset quality, with GNPAs (4.2%) rising ~10%. However, SHTF maintained PCR at ~79% (highest amongst peers).

Outlook and valuation: While the operating performance was along expected lines, both pickupinHCVsalesandimprovementinmarginswasencouraging.However,aslargepart ofthegrowthwasledbyreplacementdemandandprebuying(duetoABSimplementation...

Core earnings improvement continues; Maintain cautious outlook Shriram Transport Finance's (STFC) standalone PAT was although marginally above our expectation, nevertheless it continued to disappoint on asset quality front. Operating profit grew by 19.3% yoy and 3.9% qoq to Rs8.9bn led by healthy NII and securitisation income growth. However, bottom line growth remained muted due to higher provision expenses (+27.1% yoy and flat qoq to Rs3.9bn). Gross NPA ratio at standalone level increased to 4.2% in 2QFY16 v/s 4.1% in 1QFY16 and 3.74% in 2QFY15 as poor...