Brokerages remained positive on the stock and expect 17-36 percent potential upside despite cutting price target
Shriram Transport Finance shares fell 3.5 percent intraday on May 9 after March quarter earnings but recouped some losses as brokerages remained positive on attractive valuations, though they slashed price target.
The stock was quoting at Rs 1,017.15, down Rs 10.75, or 1.05 percent on the BSE, at 1015 hours IST.
Profit during the quarter ended March 2019 declined sharply to Rs 746.04 crore against Rs 961.76 crore recorded in the same period last year.
Net interest income, the difference between interest earned and interest expended, increased to Rs 1,905.86 crore from Rs 1,854.63 crore YoY.
Total assets under management as of March 2019 stood at Rs 1,04,482.29 crore, a growth of 8.5 percent compared to Rs 96,260.61 crore as on March 2018.
Shriram Transport Finance Company, the flagship company of the Shriram group, has a significant presence in consumer finance, life insurance, general insurance, stock broking and distribution businesses.
Here are what brokerage think of the stock:
Brokerage: Morgan Stanley | Rating: Overweight | Target: Rs 1,350 | Return: 31 percent
We stay overweight on Shriram Transport given attractive valuation and strong positioning, but slash price target to Rs 1,350 from Rs 1,515 earlier as AUM growth and NIM were weaker than we expected.
We cut revenue and EPS estimates, driven by lower AUM and NIM.
Brokerage: Macquarie | Rating: Outperform | Target: Rs 1,265 | Return: 23 percent
We have outperform rating on the stock but slashed price target to Rs 1,265 from Rs 1,320 as operating performance was weak due to slow in lending operations.
NPL reduction was modest against peers in a seasonally strong quarter, and NIM will remain flat from Q4 exit NIM of 7.2 percent throughout FY20.
Overhang from the proposed merger of Shriram Group entities remains.
Brokerage: Jefferies | Rating: Buy | Target: Rs 1,200 | Return: 17 percent
Loan growth disappointed during the quarter ended March 2019, though asset quality improved.
We see headwinds from weak commercial vehicle trends. Used commercial vehicle segment should be relatively resilient.
Lending rate hike transmission should support NIMs and prospects of potential merger may remain an overhang in the near term.
We have a buy rating on the stock but slashed price target to Rs 1,200 from Rs 1,240 earlier.
Brokerage: Deutsche Bank | Rating: Buy | Target: Rs 1,400 | Return: 36 percent
AUM growth was weak during the quarter, and high balance sheet liquidity impacted NIMs. NIM will remain soft given the current liquidity environment.
Management guided for 20 percent AUM growth which we believe is ambitious.
Valuation at 1.1x FY21e P/BV for 17 percent return on equity looks attractive, hence we retain buy call on the stock but slash price target to Rs 1,400 from Rs 1,530 earlier.Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.