Hold Shriram Transport Finance; target of Rs 1130: Axis Direct

Axis Direct's research report on Shriram Transport Finance

SHTF reported a weak Q4FY17 marked by de-growth in disbursement leading to muted AUM growth, significant pressure on margin and sharp deterioration in asset quality (change in DPD). PAT at Rs 1.5 bn (up 4.1% YoY) was lower than estimates despite reporting an in-line operating profit.

Outlook

Further, transition to 90 dpd by FY18 will add to challenges due to higher interest reversals. We roll forward our multiple to FY19E and value SHTF at 2.2x FY19E P/ABV to arrive at TP of Rs 1,130. At CMP of Rs 1,041, the stock trades at 2.3/2.0x FY18E/FY19E P/ABV of Rs 461/Rs 519, respectively.