EUR 120.00 For Business Accounts Only

MOSL: SHRIRAM TRANSPORT FINANCE (Buy)-AUM growth slows down-margins/asset quality in line

(SHTF IN, Mkt Cap USD3.6b, CMP INR1124, TP INR1385, 23% Upside, Buy)

 

• SHTF's core PBT was largely flat YoY at INR9.3b (12% beat). However, given the lower tax rate, PAT increased 26% YoY to INR7.7b (23% beat). The quarter was characterized by slowing AUM growth and stable NIM/asset quality.
• Disbursements were up 8% QoQ to INR133b, largely driven by a 9% increase in used vehicle disbursements. However, given the high repayment rate in this business, AUM grew 2% QoQ (+4% YoY) to INR1.1t. With improving liquidity in the system, coupled with a likely pick-up in demand in 4Q due to vehicle pre-buying, management expects AUM growth to inch up to high-single-digits by end-FY20.
• The company continues relying on portfolio securitization for liquidity - the share of off-balance sheet assets increased ~600bp YoY to 23%. PSU banks have just started fresh lending to the company.
• yield increased 20bp QoQ to 16.5%. This was offset by a 20bp increase in cost of funds to 9.3%. Opex grew 9% QoQ to INR5.2b.
• Gross stage 3 increased 30bp QoQ to 8.8%, while PCR remained stable at 32%. Credit cost came in at INR6.6b vs estimate of INR7b.