Buy Shriram Transport Finance; target of Rs 1660: Prabhudas Lilladher

Prabhudas Lilladher is bullish on Shriram Transport Finance has recommended buy rating on the stock with a target price of Rs 1660 in its research report dated October 27, 2018.

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October 30, 2018 / 16:08 IST

26 Aug, 2025 12:21

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Prabhudas Lilladher's research report on Shriram Transport Finance

Buoyancy in loan book (21% YoY) led by new CV business expansion (46%+ YoY growth), SHTF recorded robust 25% YoY growth in NII healthy PAT at Rs 6.09bn (PLe: Rs 5.89bn). However, the core used CV momentum stood at 15%, the incremental sequential reduction in lower yielding new CV lending, complete transmission of cost pressures steered NIM expansion to 7.52% in Q2FY19 from 7.44%/7.46% in Q1FY19/Q2FY18. However, responding to current liquidity turmoil and need for healthy ALM, recalibration in growth and margins stand imminent in near term prompting us to prune our growth target for FY19 to 15% (earlier 20%). While NIMs are expected to compress to 7.9% in FY19 (from 8%+ a year ago) as we build in 100 bps funding costs increase, these should stabilize at 8.1% FY20-21E. SHTF's mindful strategy on uncompromising NIM but cautious growth, ability to raise money (ECB, securitization) offsetting unwarranted cost pressures, less competitive intensity in domain market, improving portfolio quality (GNPAs expected decline to 6.8% by FY21 from 9.2% in FY18, credit costs fall to 2.4% in FY19 from 3.5%+ levels since past 3 years, with troubled SVL liability out of picture) and return of used CV demand cycle in FY20-21, reinforces our belief in the business model.

Outlook

Against this backdrop, we reiterate BUY reco on the stock, but roll over our multiple to Sep-21 ABV at 2.0x arriving at TP Rs 1660 (earlier 1692) incorporating near term market apprehensions.

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