Motilal Oswal's research report on Shriram City Union Finance
SCUF posted a 1QFY23 PAT of INR3.2b, up 55% YoY and 6% QoQ (14% beat). The beat was driven by healthy NII growth of 22% YoY and benign credit costs of 2.7% (steady-state credit costs in the range of 2.5%-3.0%). The quarter was characterized by a healthy ~74% YoY and 5% QoQ growth in disbursements to ~INR79b. AUM grew 17% YoY/4% QoQ to ~INR346b. Product mix further improved in favor of personal loans (PL) and has aided yields while the ability to lower borrowing costs (despite repo rates inching up) has allowed SCUF to deliver an ~85bp sequential expansion in margins. Asset quality improved with GS3 declining ~20bp QoQ without having to resort to elevated write-offs. Ability to access multiple borrowing sources, including retail fixed deposits, has led to perceptible strength on the liability side.
We maintain our BUY rating with a TP of INR2,370 (based on 1.4x FY24E BVPS).
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