MOSL: SHRIRAM TRANSPORT FINANCE (Buy)-Liquidity pressure continues to weigh on growth
Shriram Transport Finance: Liquidity pressure continues to weigh on growth
(SHTF IN, Mkt Cap USD3.3b, CMP INR1028, TP INR1325, 29% Upside, Buy)
- SHTF reported 4QFY19 PAT of INR7.5b (19% beat), largely by lower credit costs and tax rate. PPoP grew 3% YoY (5% miss) due to a contraction in margins by 40bp YoY and moderate AUM growth of 9% YoY.
- Liquidity pressure continues to weigh on loan growth. Used vehicle loans grew 1% QoQ (+8% YoY) to INR871b. However, over the past few quarters, the new vehicle loan book has been declining - from INR127b in 1HFY19 to INR116b in FY19, a decline of 9%. We expect loan growth to pick up only in 2HFY20.
- Margin shrank 25bp QoQ/40bp YoY due to yield compression (-50bp QoQ/-30bp YoY to 14.7%). However, SHTF has done a good job of containing cost of funds (calc.) at 8.5%.
- The company retired some borrowings during the quarter without refinancing them - total borrowings declined 2% QoQ to INR880b. Rather, it deployed some excess cash into lending - liquidity on the balance sheet declined from INR57b in the prior quarter closer to the run-rate level at INR40b.
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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