Buy Shriram City Union Finance; target of Rs 2746: Edelweiss

Edelweiss' research report on Shriram City Union Finance

Shriram City Union Finance (SCUF) reported Q1FY19 PAT of INR2.3bn (up 15% YoY, under IND-AS).  Key highlights: a) growth momentum improved – disbursements (ex-gold) grew >23% YoY, translating into >25% AUM growth (ex-gold); however lower NIM (on lower yields) restricted NII growth to sub-14% levels; and b) asset quality was stable to better as reflected in improving loss given default (LGD) across segments and stabilising  expected credit loss (ECL). With GST and DeMon uncertainties subsiding, we expect earnings trajectory to improve hereon.

Outlook

Earnings and book value is impacted only marginally under new accounting norm and we continue to follow I-GAAP for valuation purpose. Maintain ‘BUY’ with TP of INR2,746.