Buy Shriram Transport; target of Rs 1250: Kotak Securities

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26 Aug, 2025 12:21

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Kotak Securities' report on Shriram Transport Finance Corporation

"Core earnings came a shade above our expectations on back of marginal NIM expansion; however PAT came lower due to higher NPA provisions along with marginal higher tax rate (33.6% in Q3FY15). Strong disbursements (39.4% YoY) has been primarily driven by used CV. AUM grew at modest pace (8.0% YoY) on back of sharp decline (31.5% YoY) in new CV AUM while old CV AUM grew at moderate pace (14.2% YoY). Stable asset quality and improving NIM are positive for the stock. Stock trades reasonable (2.1x FY16E ABV) with healthy return ratios (16-17% in FY16/17E) and likely to benefit from gradual macro improvement and sharp fall in diesel prices. We also believe STFC is better placed to move to 90 days NPA recognition system with a comfortable coverage ratio (80%). We recommend BUY rating on the stock with upward revised TP of Rs.1250 (Rs.1023 earlier; 2.4xFY17E ABV) after rolling over to FY17 estimates", says Kotak Securities research report.

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