Buy Shriram City; target of Rs 790: IIFL

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Buy Shriram City; target of Rs 790: IIFL

IIFL is bullish on Shriram City and has recommended buy rating on the stock with a target of Rs 790 in its October 6, 2010 research report.

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ALSO READ See previous views by IIFL See what other Experts & Brokerages are saying about Shriram City See messages about Shriram City Shriram City BSE | NSE 31/05/12 Are Mutual Funds betting on Shriram City?

IIFL is bullish on Shriram City Union Finance (SCUF) and has recommended buy rating on the stock with a target of Rs 790 in its October 6, 2010 research report.

"Shriram City Union Finance (SCUF) is a niche player offering small business and personal loans in the rural and semi-urban markets of south India. We expect penetration into new geographies and the Group's large captive client base to drive a CAGR of 27% and 23% in assets and earnings, respectively over FY10-13ii. We expect robust asset growth and normalisation of margins to drive 24% CAGR in NII over FY10-13ii. As SCUF expands into new locations, cost ratios will witness some pressure. This will lead to a CAGR of 22% in pre-provision profits over the same period. Normalisation of credit costs and reduction in risk profile should result in an improvement in risk-adjusted returns and superior ROA of 3.1% over FY11-13ii vis-à-vis 2.8% over the last three years."

"SCUF is an attractive play on the deepening penetration of financial services into niche markets. The stock is trading at 2.3x FY12ii P/BV and has relatively under-performed vis-à-vis peers. Valuations at FY12ii P/B of 2.3x are attractive given the well-established business model, robust earnings growth and return expectations. We initiate with BUY and Rs 790 target price," says IIFL research report.

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To read the full report click on the attachment