MOSL: SHRIRAM CITY UNION FINANCE (Buy)-Growth remains muted; Asset quality improving
Shriram City Union Finance: Growth remains muted; Asset quality improving
(SCUF IN, Mkt Cap USD1.3b, CMP INR1357, TP INR1600, 18% Upside, Buy)
PAT beat driven by lower credit costs and tax rate
- SCUF reported 3QFY20 PAT at INR2.97b (9% beat). While NII and PPoP were in line with estimates (~2% YoY growth), lower credit cost (4% beat) and lower taxes (7% below est.) led to the PAT beat.
- AUM remains range-bound at ~INR300b, while spreads improved 30bp sequentially to 9.5%. We raise our EPS estimates by 2-3% for FY20/FY21.
Festive season drives 2W disbursement; Other segments sluggish
- Disbursements were up 27% YoY to INR58b, off a low base. Segmental trends are divergent - there was a strong pick-up in 2W disbursement (+80% YoY, +50% QoQ) due to the festival season, while MSME disbursements were 15% lower on a YoY basis (INR15b). We also note the sharp decline in personal loan disbursements (down 50%+ YoY).
- AUM has been range-bound at ~INR300b for the past few quarters. Over the past one year, the share of MSME financing has declined ~200bp to 57.4% while that of 2Ws has increased 250bp to 20.9%.
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.
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