Comments
Motilal Oswal Securities
Shriram
Transport Fin (Buy)
CMP: ₹1,566.60
Target: ₹1,925
Over the past few years, while commercial vehicle volumes have been stagnant, there has been a marked shift in mix towards higher-tonnage vehicles. In addition, price hikes in the past two years have been healthy (18-20 per cent on new vehicles).
While the addressable market size for Shriram Transport Finance in terms of volumes will remain largely stable, we believe better pricing and mix will drive disbursement and Assets Under Management growth. AUM is likely to grow 18-19 per cent in FY18 as compared to the management’s earlier guidance of 15 per cent growth.
After seven years of unchanged profits (₹1,200-1,300 crore), we expect the company to report ₹1,800 crore PAT in FY18, and subsequently, ₹2,500 crore and ₹3,100 crore in FY19 and FY20 respectively.
At two times the FY-20E book value, we believe the stock is attractively priced.
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