Motilal Oswal is bullish on Shriram City Union Finance recommended buy rating on the stock with a target price of Rs 910 in its research report dated August 12, 2020.
Motilal Oswal 's research report on Shriram City Union Finance
SCUF posted 1QFY21 PAT of INR1.9b (19% beat). While NII stood at INR8.5b (in-line), lower-than-expected opex (INR3.1b v/s est. INR3.6b) due to rationalization of branch expansion and employee recruitment, led the beat. Total 1QFY21 credit costs at INR3.1b include ~INR1.8b worth COVID-19 provisions (total COVID-19 outstanding provisions stand at ~INR6.1b). - Collection efficiency improved MoM (Apr/May/Jun/Jul’20 at 30% /52%/71%/80%). 26% of the book is under moratorium. ~22%/41% of the overall/HFC customers are under moratorium (~50% for HFC in Apr’20).
Outlook
We, thus, increase our FY22E EPS estimates by 20% to factor in the lower opex and credit costs. We expect SCUF to deliver normalized RoE of 12-13% in FY23E. Maintain Buy with TP of INR910 (0.7x FY22E BVPS).
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