Comments
Equirus
Shriram Transport Finance (Long)
CMP: ₹1,140
Target: ₹1,440
In our May 2018 reinitiating coverage note on Shriram Transport Finance (SHTF), we had indicated that 1) we expect per cent16 per cent 3-year AUM CAGR of SHTF as the estimated financing opportunity for 5-10 year pre-owned vehicles is ₹2.5 lakh crore, ii) With NPA recognition at 90+ DPD, pace of fresh NPA creation will moderate leading to improvement in FY19E credit cost; and 3) margins can come under pressure if SHTF targets lower vintage vehicles. So we believed upside was limited at our initiation price of ₹1,497. However, post the recent correction (24 per cent in 1.5 months) and even after factoring for the potential adverse impact of SHTF most likely honouring the NCD payments of SVL Ltd (₹650 crore of four-year Zero Coupon NCDs guaranteed by SHTF), we believe SHTF is attractively priced. Consequently we upgrade our rating to ‘long’ (from ‘add’) with a revised March 2019 target price of ₹1,440 (₹1,550 earlier) based on 2.3x FY20E ABV (vs 2.5x earlier).
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.