Motilal Oswal’s research report on Shriram Transport Finance
Shriram Transport Finance (SHTF) reported 3QFY19 PAT at INR6.4b, in line with of our estimate of INR6.2b (17% YoY growth). However, largely flattish AUM QoQ surprised negatively. Liquidity crunch in the system impacted disbursements (down 32% QoQ and 30% YoY). Company increased securitization book during the quarter to INR193b v/s INR166b a quarter ago. AUM grew 15% YoY and was flat QoQ at INR1.04t. Within AUM, share of new commercial vehicles (CVs) declined 5% QoQ, while used CVs and others were largely flat QoQ.
We view SHTF to be at the cusp of an upcycle, after a tough business cycle and stringent regulation. Bulk of the loans generated is eligible for priority-sector lending, and hence, the company should be able to generate liquidity through sell-downs. Reiterate Buy with a target price of INR1,400 (1.6x December 2020 book value).