Shriram Transport Finance - PAT in line; business growth surprised positively - Religare

SHTF's Q2FY13 net revenues/PAT were in line at Rs 9bn/Rs 3.4bn while business growth was strong with disbursements/AUM growing 29% YoY/16% YoY. Reported NIMs improved by 25bps QoQ due to changing asset mix and better balance sheet efficiency. The management appears more confident on AUM growth given strong disbursements in the used CV segment and expansion in rural areas. Valuations at 1.6x FY14E BV and 8.3x FY14E EPS are also reasonable. Maintain BUY.

- Disbursements growth strong: Disbursements in the used CV segment grew by 33% YoY (although from a low base) but disbursements in the new CV space remained muted at 11% YoY. The management appears more confident on growth and has increased its AUM target from 12% to 15% in FY13. We are raising our disbursements/AUM growth estimates to 19%/16.5% in FY13E from 16%/14%.

- NIMs improve QoQ; provisions stable: NII was marginally above estimates due to better cash utilisation but other income declined QoQ on lower income from MFs. Net revenues were in line. Reported NIMs improved by 25bps. Going forward, the company would also benefit from lower wholesale rates. GNPLs/NNPLs were largely stable at 2.9%/0.6%. Provisions on AUM were stable QoQ at 188bps (higher than the average of 1.5% over FY08-FY11).

- Muted disbursements in the equipment finance business: Disbursements growth was muted at 6% YoY. particularly in the new CE segment. AUM grew by 85% YoY and 11% QoQ due to a low base. Fee income was stable QoQ at Rs 182mn.

- Valuations reasonable; maintain BUY: SHTF has underperform other retail NBFCs due to regulatory overhang, single product nature of the business and moderation in growth on slowdown in CV sales. While growth is likely to remain muted compared with peers, valuations are reasonable given 20%+ ROEs. Maintain BUY with a revised Sep'13 TP of Rs 700/share (2.0x Sep'13E BV).

Source : Equity Bulls

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