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HDFC Securities
Shriram Transport Fin: (Add )
Target: ₹1,441
CMP: ₹1299.15
Shriram Transport Finance (SHTF) reported in-line P&L performance (13 per cent y-o-y PPOP growth) with steady AUM growth (nearly 7 per cent y-o-y) and gradually improving asset quality. AUM growth was largely driven by used vehicles segment with an uptick in economic activity during the quarter.
Non-tax provisions remained steady at about 2.7 per cent of AUM and are expected to moderate to 2 per cent during FY22-FY23.
The company restructured ₹280 crore of loans during the quarter (₹310 crore in Q3-FY21) and wrote off ₹540 crore of loans (about 2 per cent annualised). With improving PCR at 42 per cent and bulk of impairment recognition over, we expect moderation in credit costs during FY22-FY23.
GNPLs declined sequentially by 5 bps (on pro-forma basis) with write-offs at around 2 per cent of AUM. We revise our FY22/FY23 earnings estimates downwards by 3 per cent/5 per cent to factor in higher LLPs on account of second wave of pandemic and higher provisioning buffer for slippages.
We maintain Add with a revised target price of ₹1,441 (earlier ₹1,471).
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