Edelweiss' report on Shriram Transport Finance Corporation (SHTF)
"Shriram Transport Finance’s (SHTF) Q1FY16 PAT (standalone) at INR3.2bn was broadly in line with our estimate. The company has temporarily discontinued detailed reporting of the construction equipment business as the merger process is underway (expected to be completed by Q4FY16). While revenue surpassed our estimate, the disappointment flowed from higher NPLs, in CV financing business (GNPLs rose to >4% on 180dpd) as well as construction equipment business (GNPLs surged >35% on 150dpd). With concerns of below-normal monsoon subsiding, SHTF has painted an optimistic picture for H2FY16 and expects to track higher end of 10-15% growth guided before. However, given the prevalent tough operating environment, higher credit cost (moving to 150dpd norm) and concerns on equipment finance unit, we expect RoE to be capped (<15%). Juxtaposing this with valuation of 2.0x FY17E P/ABV (consolidated) we believe the stock is fairly valued. Hence, maintain hold", says Edelweiss research report.
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