Buy Shriram Trans; target of Rs 950: Axis securities

Trade

• Watchlist
• Portfolio
• Message
• Set Alert

 

 

Choose Stock Exchange: BSE LIVE NSE LIVE

26 Aug, 2025 12:21

Volume

Todays L/H

More

×

Axis securities's research report on Shriram Trans Shriram Transport Finance’s (SHTF) Q3FY16 PAT at Rs 3.8 bn (20% YoY) was higher than our estimate, largely on account of 44 bps QoQ uptick in margin.Though transition of banks to marginal cost of funding-based lending will be positive for NIM, higher incremental growth from relatively low yielding new CV segment and likely income reversals from increase in GNPLs will keep some pressure on margin. AUM growth too witnessed a sharp uptick; however, asset quality deteriorated further with GNPLs increasing 8% QoQ and ratio was up 11 bps QoQ at 4.3%. Transitioning to lower NPL bucket will keep credit cost and NPLs at higher levels. Management indicated transitioning to 150-day NPL recognition will increase the GNPLs by 120-150 bps and merger with equipment finance subsidiary will further add 50-80 bps to GNPLs.Over the last 6 years, balance sheet grew ~2.4x; however, PAT has remained range bound (Rs 12-14 bn) signifying huge pressure on margin and asset quality. Incrementally, merging the equipment finance business (has high NPAs) along with transitioning to stringent NPA recognition norms (90 dpd from current 180 dpd) will keep profitability under pressure. To factor in the same, we reduce our target multiple to 2.2x (2.4x earlier) but retain our BUY rating (13% upside from CMP) due tostock price correction. At CMP of Rs 842, SHTF trades at 2xFY17E ABV of Rs 432.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.

Read More