Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Shriram Transport Finance
Growth visibility remains high
Having met with management today at our 15th Annual India Investor
Conference in New Delhi, these are some of our takeaways...
„ STFC targets the 5-12-year-old truck segment. The population of trucks that
are now likely to enter the market (FY11-12) had sales of 2.2mn units in
FY99-07, versus 1.6mn units in FY97-05. Hence, we reckon that a ~20-21%
CAGR growth in FY10-12 is sustainable.
„ Margins likely to sustain at estimated levels owing to higher securitization
(higher spread), higher share of pre-owned (high-yielding), utilizing cash
balances and leveraging capital. We are building in normalization of margins
(AUM) to +7.9-8.0% in FY13 (8.9% in 3Q).
„ STFC is leveraging its brand name, strategic presence, customer relationship
management and infrastructure (wide branch network and large employee
base) to provide value-added services to customers and, in turn, enhancing
its fee-based income. STFC has or is in the process of starting auto malls
and truck bazaars, which will not only give fee income to STFC, but also bring
customers closer to financing their acquisition.
Price objective basis & risk
Shriram Transport Finance (SHTFF)
We rate Shriram Transport Finance (STFCL) a Buy, with a PO of Rs900. STFCL
is a leader in pre-owned truck financing (organized), with 20-25% market share,
and it has a 7-8% share in new truck finance. STFCL, owing to its unique
appraisal skills, wide local distribution and 10-year track record, has showna 75%
earnings CAGR over the past 5 years, while restricting net NPLs to 1.0%. We
estimate earnings growth at +34/25/25% in FY11/12/13E, and RoE to be amongst
the highest, at over +28-29%. We, therefore, believe the stock, trading at +3.3-
3.4x FY11E book, can sustain these multiples one year out. Alternatively, one
can value STFCL on PE basis, given that the company has the flexibility of
securitizing, which can allow it to raise capital without dilution. Our PO implies 13x
FY12E earnings, which is lower than the historical P/E range of 14x-15x and still
a +15% discount to market multiples. Risks are a rise in defaults, which could
erode earnings, and the entry of banks into the used CV finance segment, which
could hurt yields.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Shriram Transport Finance
Growth visibility remains high
Having met with management today at our 15th Annual India Investor
Conference in New Delhi, these are some of our takeaways...
„ STFC targets the 5-12-year-old truck segment. The population of trucks that
are now likely to enter the market (FY11-12) had sales of 2.2mn units in
FY99-07, versus 1.6mn units in FY97-05. Hence, we reckon that a ~20-21%
CAGR growth in FY10-12 is sustainable.
„ Margins likely to sustain at estimated levels owing to higher securitization
(higher spread), higher share of pre-owned (high-yielding), utilizing cash
balances and leveraging capital. We are building in normalization of margins
(AUM) to +7.9-8.0% in FY13 (8.9% in 3Q).
„ STFC is leveraging its brand name, strategic presence, customer relationship
management and infrastructure (wide branch network and large employee
base) to provide value-added services to customers and, in turn, enhancing
its fee-based income. STFC has or is in the process of starting auto malls
and truck bazaars, which will not only give fee income to STFC, but also bring
customers closer to financing their acquisition.
Price objective basis & risk
Shriram Transport Finance (SHTFF)
We rate Shriram Transport Finance (STFCL) a Buy, with a PO of Rs900. STFCL
is a leader in pre-owned truck financing (organized), with 20-25% market share,
and it has a 7-8% share in new truck finance. STFCL, owing to its unique
appraisal skills, wide local distribution and 10-year track record, has showna 75%
earnings CAGR over the past 5 years, while restricting net NPLs to 1.0%. We
estimate earnings growth at +34/25/25% in FY11/12/13E, and RoE to be amongst
the highest, at over +28-29%. We, therefore, believe the stock, trading at +3.3-
3.4x FY11E book, can sustain these multiples one year out. Alternatively, one
can value STFCL on PE basis, given that the company has the flexibility of
securitizing, which can allow it to raise capital without dilution. Our PO implies 13x
FY12E earnings, which is lower than the historical P/E range of 14x-15x and still
a +15% discount to market multiples. Risks are a rise in defaults, which could
erode earnings, and the entry of banks into the used CV finance segment, which
could hurt yields.
No comments:
Post a Comment