Buy Shriram City; target of Rs 624: Firstcall Research

“Shriram City Union Finance is a major organized lender in the Retail and Micro & small enterprises credit space with leading market share in the southern region. Large customer base of 3.55 million and growing everyday. Shriram City Union Finance Ltd has recommended a final dividend of Rs 3.5 per equity share (35%) During the quarter ended, the robust growth of revenue is increased by 44.24% Rs 3998 million. Shriram city Finance has got certifited with ISO 27001. The top line and bottom line of the company are expected to grow at a CAGR of 19% and 25% over 2010 to 2013E respectively.”

“Shriram city union finance ltd reported a rise of 44.24% sales in the net sales for the quarter ended March 2011. During the quarter, the company disclosed a net profit of Rs 771.90 million.Net sales are increased by 44.24% to Rs 3998 million. In the same period, total income of the company was at Rs 4011.90 million, a rise of 43.32% over the prior year period. Company EPS is stood at Rs 15.58 for the quarter ended march 2011.”

“At the current market price of Rs 552, the stock is trading at 8.77 x FY12E and 7.26 x FY13E respectively. Earning per share (EPS) of the company for the earnings for FY12E and FY13E is seen at Rs 62.95 and Rs 76.08 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 19% and 25% over 2010 to 2013E respectively. On the basis of EV/EBITDA, the stock trades at 2.38 x for FY12E and 2.06 x for FY13E. Price to Book Value of the stock is expected to be at 1.79 x and 1.44 x respectively for FY12E and FY13E. We expect that the company will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs 624 for Medium to Long term investment,” says Firstcall research report.

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