Prabhudas Lilladher's research report on Shriram Transport Finance
SHTF reported good set of numbers in Q2FY23 (PAT up 38% YoY and 10% on a QoQ basis) to Rs10.6bn(Ple: Rs10.0bn). Lower provisions ( down 16.5% QoQ basis) and strong AUM growth led to beat in earnings. Good loan traction (3.5% QoQ/11.2%YoY) led by both used CVs (up 3.3%QoQ/13.3%YoY) now forming 93.2% of overall loans down from 93.3% in Q1’23 and new CVs (up 5.0%QoQ) now forming 4.4% of overall loans up from 4.3% in Q1’23 . NII at Rs 25.2bn came below our estimates (Ple: Rs26.4bn) falling 1.6%QoQ but growing 17.7% YoY as marginally lower yields (15.38% vs 15.58% in Q4’22) offset strongAUM growth .GNPA/stage 3 came in at 6.9% vs 7.0% in Q1’23. We believe company can target strong growth in the coming quarters by riding the CV upcycle, and show further improvement in asset quality.
Outlook
Going forward, re-rating from current levels would be an outcome of sustaining improvement of AUM(we forecast a 13% AUM CAGR from FY22-24E) from new vehicle sales (which saw a 5.0% QoQ growth, after many quarters of de-growth ) and consolidating strong performance in used vehicle sales. Our estimates remain unchanged. We reiterate ‘BUY’ rating and value SHTF at 1.3x PABV Sep’24E and maintain our target price at INR Rs1,521.
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