MOSL: SHRIRAM TRANSPORT FINANCE (Buy)-Healthy disbursements; NIM and credit costs surprise negatively
SHRIRAM TRANSPORT FINANCE: Healthy disbursements; NIM and credit costs surprise negatively
(SHTF IN, Mkt Cap USD5b, CMP INR1391, TP INR1600, 15% Upside, Buy)
- PAT declined by 77% QoQ and 47% YoY to INR1.7b in 1QFY22 (~71% miss). Credit cost was elevated at INR14.4b (~4.9% annualized).
- Reported NIM at 6.4% was impacted by higher interest expenses and excess liquidity on the Balance Sheet. Disbursements were strong (down 15% QoQ), albeit a little surprising, even in a COVID-disrupted quarter.
- Restructuring was minimal, with the total restructured pool contained ~72bp. It carries COVID-related provisions of INR28.5b (2.4% of AUM).
- Looking at its disbursement/collections trajectory, we estimate a strong FY22E, 10% AUM growth, and a RoA/RoE of ~1.8/11%. Management on the call mentioned that it has restarted evaluating the merger process within the group companies, which may be a near-term overhang till the final decision/scheme is announced. We maintain our Buy rating, with a TP of INR1,600/share at 1.5x FY23E P/BV.
Shriram Transport Finance is a public company domiciled in India. Co. provides finance for commercial vehicles, construction equipments and other loans. Co. also provides financial services viz., commercial vehicle financing business, consumer finance, life and general insurance, stock broking, chit funds and distribution of financial products such as life and general insurance products and units of mutual funds. Apart from these financial services, Co. is also in non-financial services business such as property development, engineering projects and information technology.
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.
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