Visit http://indiaer.blogspot.com/ for complete details �� ��
EARNINGS REVIEW
Shriram Transport Finance (SRTR.BO)
Neutral
Above expectations on higher NII; retain Neutral on valuation
2QFY11 key result highlights
Shriram Transport Finance (SHFT) reported net profit of c.Rs3bn in 2QFY11,
44% yoy growth (7% ahead of GSe). NII growth was strong at 43% yoy (9%
ahead of GSe) driven by c.20bp qoq uptick in NIMs (on AUM) to 8.34%.
Interest expenses were 5% lower than GSe as liabilities would likely re-price
upwards with a lag. In our view, SHFT’s spreads would see pressure as
liabilities re-price, while NIMs would be bolstered by high liquidity of Rs48bn
(16% of total assets), (2) low leverage given higher off-book assets, and (3)
pricing power in niche segment. Other key highlights: (1) Disbursements grew
by 28% yoy, with pre-owned CV disbursements were up 21% yoy.
Management maintained FY11 AUM growth to be 20%-25% yoy (2QFY11:
23% yoy). (2) SHFT securitized Rs 25.5bn, taking off-books AUM to 35.5% of
total AUM. However, securitization income was 5% lower qoq due to sell
down of loans coming late in the half. (3) Expenses were 20% higher than
GSe due to one-off impact of raising Rs6bn retail deposits during the quarter.
(4) Gross NPAs remained stable qoq at 2.5% (up 2.5% qoq in absolute terms).
We still believe the economic cycle is favourable and SHFT has strong core
competencies in its niche segment. However, we think this is already
reflected in current valuations (3.7X FY11E BVPS, 15X FY11E EPS), and
retain our Neutral rating. We fine-tune our FY11E/12E/13E PAT by 0.4%-3.6%
on higher NII, partly off-set by higher expenses and lower fees. Our 12-m
CAMELOT TP is Rs810 (up 8%), as we roll forward BVPS by one quarter. We
note that our equity value would rise to Rs830, if we were to base our
valuation on March 2012E BVPS. Risks: Rising borrowing costs, economic
slowdown (downside); Fee income initiatives (upside).
No comments:
Post a Comment