Buy Shriram Trans; target of Rs 1162: Motilal Oswal

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26 Aug, 2025 12:21

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Motilal Oswal's research report on Shriram TransSHTF’s 4QFY16 PAT de-grew 54% YoY & 62% QoQ to INR1.43b (49% miss). While the operating profit was in-line with expectation; higher provisions of INR8.6b v/s est. of INR6.1b- led by migration to 150dpd NPL reporting norms coupled with merger of CE subsidiary (which had INR3.6b of loss) led to PAT miss. While reported NPL inched to 6.2% v/s 4.3% due to NPL migration and merger of troubled subsidiary. The asset quality performance was much better than expectation as a) On 180dpd NPL stood 4.3% flat QoQ and b) migration from 180 to 150dpd saw NPL addition of 60bps against the expected 150bps addition. Pursuant to merger INR9b of NPLs of SEF were added to standalone numbers, this resulted into 130bps of GNPL addition. SHTF’s return ratios are at cyclical low, with decadal high credit cost and NPLs. However, incremental data points like decline in fuel prices, improved utilization levels and steady uptick in CV segment indicate that SHTF is exiting the down cycle. While reported GNPLs are likely to remain at elevated levels in the near term due to NPL migration. SHTF is well placed to ride the upcycle, delayed pick-up in infra activities, lower agri. output and performance of equipment book are the key near-term risks. Led by better than expected growth and asset quality performance we are upgrading our FY17/18 estimates by ~5%. The stock is currently trading at 1.9x/1.6x FY17/18 BV. Maintain Buy with TP of INR1,162 (2x FY18 BV). For all recommendations, click here 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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