Motilal Oswal is bullish on Shriram Transport Finance has recommended buy rating on the stock with a target price of Rs 1400 in its research report dated January 29, 2019.
Motilal Oswal's research report on Shriram Transport Finance
Shriram Transport Finance (SHTF) reported 3QFY19 PAT at INR6.4b, in line with of our estimate of INR6.2b (17% YoY growth). However, largely flattish AUM QoQ surprised negatively. Liquidity crunch in the system impacted disbursements (down 32% QoQ and 30% YoY). Company increased securitization book during the quarter to INR193b v/s INR166b a quarter ago. AUM grew 15% YoY and was flat QoQ at INR1.04t. Within AUM, share of new commercial vehicles (CVs) declined 5% QoQ, while used CVs and others were largely flat QoQ.
We view SHTF to be at the cusp of an upcycle, after a tough business cycle and stringent regulation. Bulk of the loans generated is eligible for priority-sector lending, and hence, the company should be able to generate liquidity through sell-downs. Reiterate Buy with a target price of INR1,400 (1.6x December 2020 book value).
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