Buy Shriram Trans; target of Rs 1183:Khambatta Securities

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26 Aug, 2025 12:21

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Khambatta Securities's research report on Shriram TransShriram Transport Finance Company Limited (STFC) beats our estimate in its 3Q FY16 financial results. During the quarter, STFC‟s results exceeded our estimate between 4.0% and 6.5%, except non-interest income which fell short of 8.30% from our estimate. Robust growth in AUM and healthy net interest margin (NIM) helped in exceeding our estimate. During the quarter, AUM grew by 16.6% y-o-y to Rs 665.58 bn against our estimate of Rs 656.3 bn which was 15% y-o-y growth. During the quarter, Company reported 83 bps y-o-y and 44 bps q-o-q surge in NIM to 7.47%. During the quarter, net interest income (NII) grew by 24.5% y-o-y to Rs 11.44 bn and interest income from securitisation increased 20.8% y-o-y to Rs 1.57 bn. Consequently the total interest income grew by 24.0% y-o-y to Rs 13.0 bn against our estimate of Rs 12.50 bn, exceeding our estimate by 4.1%. Healthy NII and non-interest income boosted the operating income, resulting 24% y-o-y and 8.7% q-o-q growth to Rs 13.20 bn against our estimate of Rs 12.71 bn. During the quarter, non-interest income grew by 20.3% y-o-y to Rs 193 mn against our estimate of Rs 210 mn. During the quarter, Company reported an improvement in cost-to-income ratio, resulting 24.8% y-o-y and 8.4% q-o-q growth in operating profit to Rs 9.13 bn against our estimate of Rs 9.53 bn. During the quarter, operating expenses was Rs 3.29 bn, registered 21.7% y-o-y growth and cost-to-income ratio declined 47 bps y-o-y to 24.9%. During the quarter, provisionsAt current market price of Rs 809, we maintain a STFC‟s common share with a “Strong Buy”. At CMP, the stock is trading at 1.89x of FY16E adjusted book value (ABV) of Rs 429 and 1.71x of FY17E ABV of Rs 473. Based on ERE valuation model (Cost of equity: 13.10%), we arrived at a target price of Rs 1,183/share which discount 2.76x of FY16E ABV and 2.50x FY17E ABV. At CMP of Rs 809, we recommend STFC‟s common stock with a “Strong Buy” with a target price of Rs 1,183/share which implies ~46% upside.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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