Edelweiss is bullish on Shriram Transport Finance has recommended buy rating on the stock with a target price of Rs 1985 in its research report dated April 30, 2018.
Edelweiss' research report on Shriram Transport Finance
Shriram Transport Finance’s (SHTF) Q4FY18 performance reaffirms our stance that cyclical tailwinds and active replacement demand will benefit the company going forward (refer company update, “Cyclical tailwinds visible”, dated April 19, 2017). Growth momentum was robust (disbursement up >40%), leading to an AUM jump of >20% YoY to INR953bn (after six quarters). This, along with stable NIMs (7.5%), led to strong NII (up ~30% YoY). Transition to 90dpd recognition led to rise in GNPLs. However, SHTF maintained coverage at >70%, resulting in higher credit cost and consequently earnings miss (PAT of INR1.4bn, down 3% YoY). We believe, anticipated cyclical tailwinds will enable SHTF sustain its operationally strong performance.
Outlook
Maintain ‘BUY’ with revised TP of INR1,985 (earlier INR1,740, 2.75x P/ABV), given improved earning visibility.
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