Buy Shriram City Union Finance; target of Rs 2689: Motilal Oswal

Motilal Oswal's research report on Shriram City Union Finance

Shriram City Union Finance’s (SCUF) 4QFY17 PAT declined 78% YoY to INR 120m. However, this belies the strong operating performance in the quarter. Operating profit was up 26% YoY (est. of +11%), driven by strong loan growth, lower cost of funds and controlled opex.

Outlook

We believe this is a 3.5-4.0%+ RoA and 17-18% RoE business on a run-rate basis. We keep our estimates largely unchanged as lower opex in FY18/19 is offset by higher credit costs. Buy with a TP of INR 2,689 (2.7x FY19E BVPS).