Buy Shriram Transport Finance; target of Rs 1669: HDFC Securities

HDFC Securities' research report on Shriram Transport Finance

SHTF  continued  to  exhibit  its  dominance  in the used CV space with yet another  solid  show.  Disbursements  hit an all-time high (+65/8% YoY/QoQ) driven  by  higher demand for new CVs. Lower provisioning (down 4% YoY) and better asset quality performance (GNPA down 8bps QoQ) led to a net earnings growth  of  43%  YoY.  Sticky NIMs, (7.5%) despite the fall in yields was a positive surprise

Outlook

Mid-teen growth, moderation in provisioning and reduction in CoF will crystallize into a RoAA improvement of 36bps over FY18-20E. With our conservative NIM and provisioning estimates, an earnings beat is likely. Maintain BUY with a TP of Rs 1,669 (2.75x Dec-19E ABV of Rs 607) For all recommendations report, click here

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