MOSL: SHRIRAM CITY UNION FINANCE (Buy)-Strong operating performance-estimates largely unchanged
​Shriram City Union Finance: Strong operating performance; estimates largely unchanged
(SHCF IN, Mkt Cap USD2.1b, CMP INR2138, TP INR2689, 26% Upside, Buy)
- Shriram City Union Finance’s (SCUF) 4QFY17 PAT declined 78% YoY to INR120m. However, this belies the strong operating performance in the quarter. Operating profit was up 26% YoY (est. of +11%), driven by strong loan growth, lower cost of funds and controlled opex.
- After a muted 3Q, disbursements picked up 20% YoY to INR62.5b. As a result, AUM grew 18% YoY (+2.6% QoQ) to INR231b, driven by MSME loans. Management continues to target 20%+ AUM growth in the non-gold financing portfolio.
- Total operating expenses declined 5% YoY/QoQ to INR2.8b, driven by a 9% decline in employee costs. Management is confident of improvement in opex ratios in FY18/19 as the impact of the new MSME loan sourcing strategy (under consultation with McKinsey) plays out.
- Asset quality performed better than expectations. GNPL ratio of 6.73% beat our estimate of 7.47%; however, write-offs were high at INR1.4b (2.5% annualized). Collections, which dipped 9.9% in 3QFY17, improved to 8.2% in the quarter. The company continues to make prudent provisions on its NPLs, with PCR of 73% at the end of the quarter. Note that SCUF’s PCR is best-in-class among our NBFC coverage companies.
Shriram City Union Finance Limited is an India-based non-banking financial company (NBFC). The Company is specialized on offering retail financing solutions, which include micro small and medium enterprise (MSME) loans. It offers a range of options for financing the purchase of two wheeler vehicles across manufacturers and brands. It offers loan against gold jewelry. It offers loans to finance the purchase of new and pre-owned passenger and commercial vehicles, which includes three wheelers, four wheelers, pre-owned and new cars. It offers home loans, through its subsidiary, Shriram Housing Finance Ltd. (SHFL).
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.