Accumulate Shriram Transport; target Rs 750: P Lilladher
Brokerage house Prabhudas Lilladher is bullish on Shriram Transport Finance (SHTF) and has recommended 'Accumulate' rating on the stock with a price target of Rs 750 in its research report dated July 23, 2013.
July 25, 2013 / 13:10 IST
Prabhudas Lilladher's report on Shriram Transport Finance (SHTF)
"SHTF reported lower-than-expected PAT at Rs3.4bn mainly due to a miss on NIMs/Opex. Though growth has surprised positively, incremental growth is coming at far lower ROAs (our 10 percent EPS cut pushes ROAs down to 2.7 percent) and with a weak CV cycle, asset quality risks remain. We have been maintaining a cautious stance on the CV cycle and SHTF but current valuations at 1.6x Sep-14 book will support stock price considering SHTF.s used CV model which is not be easily replicable.""Growth surprised again with ~33 percent YoY growth in the used CV book leading to overall AUM growth of ~24 percent YoY v/s management guidance of ~15 percent. Management indicated that large part of the incremental growth was driven by “Newer used CV” book which they have been building over the last 2-3 quarters. Admittedly, yields in this segment at 15 percent is better than new CV financing (11- 11.5 percent) where SHTF has slowed disbursements significantly but 200-250bps lower yields v/s SHTF's existing book is impacting NIMs without a proportional impact on credit costs.""The saving grace has been that Gross NPA accretion/credit costs have been on expected lines; this is a positive, given the tough CV cycle. Management expects credit costs to remain at current levels till economy picks up but with the liquidity tightening, risks remain in the CV book with an elongated cycle + potential impact from moving to 90 from 180day NPAs. Accumulate the stock with a target price of Rs 750," says Prabhudas Lilladher research report.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. 
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