Axis Direct's research report on Shriram Transport Finance
Although SHTF's operating profits were above estimates, 32% QoQ rise in provisions dragged PAT down 8% YoY. Growth in AUM moderated to 15% YoY, as disbursements fell 23% YoY (impact of demonetization). New CVs saw higher demand;and calculated yields were down 20bps QoQ. NIM benefited from 43 bps QoQ reduction in cost of funds, thereby rising 3bps QoQ to 7.2%. GNPAs, ignoring RBI dispensation, rose 74 bps QoQ to 7.3% (6.6% on reported basis).
Outlook
Though mgmt seems optimistic on growth, we expect it to be challenging on the backdrop of rising competition from banks, NBFCs and new players (SFBs). NIMs may face pressure due to higher demand from low-yielding assets. Transition to 90 dpd by FY18 to be another challenge. We hence cut our FY17/18 estimates by 9%/8% and value SHTF at 2.3x FY18E P/ABV (vs. 2.6x earlier). At CMP, SHTF trades at 2.2x/2.1x FY17E/FY18E ABV of Rs 427/Rs 449, respectively.
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