Buy Shriram City Union Finance, target price Rs 1125: Motilal Oswal

Motilal Oswal has given a buy rating to Shriram City Union Finance with a target price of Rs 1125. The share price moved up by 2.23 per cent from its previous close of Rs 859.85. The stock’s last traded price is Rs 879.

Shriram City Union Finance Ltd., incorporated in the year 1986, is a Mid Cap company (having a market cap of Rs 5677.24 Crore) operating in NBFC sector.

Financials
For the quarter ended 30-09-2020, the company reported a Consolidated sales of Rs 1507.50 Crore, up 1.67 % from last quarter Sales of Rs 1482.78 Crore and down 3.46 % from last year same quarter Sales of Rs 1561.60 Crore Company reported net profit after tax of Rs 275.46 Crore in latest quarter.

Investment Rationale
The brokerage models 3.9%/3.2% credit costs for FY21/22E. It has upgraded EPS estimates by 14% for FY21E (due to lower credit costs) and 3% for FY22E. SCUF is likely to deliver normalized RoA/RoE of 4%/13% in FY23E. It maintains Buy with TP of 1,125 (0.8x Sep’22E BVPS).

Promoter/FII Holdings
Promoters held 34.6 per cent stake in the company as of Sept 30, 2020, while FIIs held 27.1 per cent, DIIs 35.9 per cent and public and others 2.5 per cent.