Hold Shriram Transport Finance; target of Rs 1040: Axis Direct

Axis Direct's research report on Shriram Transport Finance

We interacted with Mr. Sanjay Mundra, Senior VP at Shriram Transport Finance Ltd. (SHTF), at our Auto Conference to get an update on the business and understand the demand outlook. Mr. Mundra believes that the growth will remain uneven over the medium term, with Q4 likely to register decent growth, followed by a damp H1FY18 and a steady recovery after that (contingent on monsoon and GST).

Outlook

However, the big overhang on the stock continues to be the transition to lower GNPA recognition bucket (120 dpd by end-FY17 and 90 dpd by end-FY18). Credit costs are thus likely to remain elevated in the near term though improvement is likely given the benign CV cycle. Despite higher interest reversal, NIM to remain resilient cushioned by declining cost of funds. Maintain HOLD.