Accumulate Shriram Transport; target Rs 800: P Lilladher

Prabhudas Lilladher is bullish on Shriram Transport (SHTF) and has recommended accumulate rating on the stock with a target price of Rs 800 in its January 25, 2013 research report.

"Shriram Transport (SHTF) reported in-line Q3FY13 PAT at Rs3.5bn but a pick-up in growth over the last two quarters has been the key positive. Used CV disbursement pick-up has been much stronger than our expectations and asset quality on used CVs have also held up better than asset quality of new CVs reported by HDFCB/KMB. Though growth has surprised, we remain a bit cautious on the CV cycle and valuations at ~2x FY14 book is fair. We expect SHTF to deliver ~20% ROEs over FY13/15 v/s 26% delivered over FY05-12, limiting the case for a significant re-rating beyond our PT multiple of ~2.1x FY14 book.

SHTF reported AUM growth of ~18.5%, driven by ~41% YoY growth in used CV disbursements. Growth has been better than management guidance and management indicated that their rural initiatives (~300 rural centres) and re-financing opportunity from the last CV boom is aiding used CV growth. SHTF continues to grow the new CV book moderately due to high competition and even in used CVs, management has maintained LTVs at ~65%.

Reported margins indicated a fall of ~20bps but core NIM performance was better as higher securitization done in Q3FY13 (where SHTF books income on a monthly basis) + higher investments carried led to some NIM compression. We expect NIMs to stabilize in the near term and improve in FY14 largely due to SHTF’s fixed rate loan book. Re-financing of off- B/S funding was a risk to margins but feedback suggests that PTC transactions are being done at 9.5-9.75% which is better than street expectations.

Gross and Net NPAs have remained stable QoQ and is a positive surprise, especially after material inch-up in slippages reported by HDFC Bank. Credit cost at ~190bps of AUMs was also in line with near-term trends and is not indicative of significant asset quality issues. Maintain 'Accumulate' rating on the stock with a target price of Rs 800," says Prabhudas Lilladher research report.

Non-Institutions holding more than 90% in Indian cos

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

To read the full report click on the attachment

Read More