Buy Shriram Transport Finance; target of Rs 1334: Edelweiss

Edelweiss' research report on Shriram Transport Finance

Shriram Transport Finance’s (SHTF) Q4FY17 earnings were soft given the transition to 120-day NPL, which accounted for two-third jump in GNPLs to 8.2% (6.6% in Q3FY17). Moreover, it has conservatively maintained 70% coverage (our estimate 65%), leading to higher credit cost. NII was impacted by INR400mn interest reversal.

Outlook

While there are a few structural overhangs like implementation of scrappage policy, GST etc., anticipated cyclical tailwinds and soft stock performance should be perceived as an opportunity to build position. Maintain ‘BUY’.