Shriram Finance Ltd. share price target

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...

SHTF Q1FY16 results were in line with expectation with NII/operating profit at Rs 11.5/8.7bn. However, with higherthanexpected provisioning, net profit came in slightly belowexpectationatRs3.2bn.The19%growthinNIIwasaidedby22bpsexpansioninNIMs...

Asset quality remains the key

SHTFs 1Q results were a mixed bag with higher than expected earnings and an unexpected deterioration in asset quality. GNPAs jumped ~12% QoQ (highest in last twelve quarters) largely impacted by unseasonal rains.

Rs2.3bn. As a result the consolidated PAT declined 73%yoy. However, result of the standalone entity was broadly in line with expectation with NII at Rs10.9bn and PAT at Rs3.2bn. Asset quality in the standalone entity also remain broadly stable with 6%qoq...

SHTFs construction equipment (CE) finance subsidiary surprised negatively. It reported huge loss of Rs 2.3bn led by sharp rise in NPLs (Rs 4.8bn, 5x QoQ). On standalone basis, business was as usual and on expected lines. Core (Rs 10.8bn, 19%) & net earnings (Rs 3.2bn, 7%) were inline led by NIM uptick (fourth consecutive qtr) 3bps QoQ and stable growth trend in AUMs, 11%. High PCR of 80% kept provisions elevated at ann. 2.2%.

Shriram Transport Finance Ltd. (STFC), one of the largest assets financing NBFC, witnessed marginal increase in bottom-line with PAT at Rs. 303crores in Q3FY12 as against Rs 301crores in the corresponding Q3FY12. GNPA of the firm stood at 2.79% in Q3FY12 whereas NNPA stood at 0.40% as against 0.41% in Q3FY12. Regulatory concerns with respect to NBFCs guidelines, priority sector norms and securitization guidelines may pose few hurdles for the company. But we remain positive on the stock owing to core business strength, healthy capitalization and stable returns. Owing to STFL's niche business model catering to Used CV segment, the company looks attractive for the longer term. We recommend a BUY with a...