Motilal Oswal's research report on Shriram Transport Finance
SHTF earnings were buoyed by interest income write-back of ~INR1.1b and tax reversal of INR820m, which resulted in a lower effective rate. Momentum in disbursements has been strong, aided by a 20-35% increase in used CV prices across categories over the last one year. Asset quality improvement was impressive, with GS3 declining 130bp QoQ to 7.1%. The same was largely driven by write-offs, which were elevated at INR14.7b, relative to the run-rate of INR4-5b over the last six quarters. In the backdrop of the announced merger, the management will work on product integration over the next two quarters and securing all necessary approvals. Technical reasons (of a potential supply overhang after the merger) aside, the merged entity will emerge stronger than the respective standalone businesses.
We maintain our Buy rating with a TP of INR1,500 per share (based on 1.3x FY24E BVPS).