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Shriram Transport Finance Overweight
SRTR.BO, SHTF IN
1Q profits in line but a downside risk to outlook post rate hike
Shriram transport 1QFY12 PAT of Rs3.5B (+20% Y/Y, 2% Q/Q) was
largely in line with our estimate. However, near-term downside risks exist
post RBI’s latest rate action. The company in an analyst meet today
highlighted concerns on growth guidance and NIMs ahead. Policy
environment near term too is likely to be in a state of flux pending clarity
on securitization norms and overall NBFC regulations. While we continue
to be believers in the core “franchise” of the business, we think RBI's rate
“shock” today accentuates near-term headwinds.
Key financial highlights: 1) ROA maintained at 3.8% as NIM remained
stable Y/Y thanks to spreads locked in on securitized portfolio, 2) AUM
growth of 22% Y/Y was strong but sequentially has tapered off to 2%
Q/Q. Disbursement growth was 20% Y/Y, 3) Asset quality has slightly
deteriorated with Gross NPA moving to 2.66% from 2.64%.
Provisioning growth of 36% Y/Y outpaced loan growth. Overall ROE
respectable at 27.4% but down by 160 bps Y/Y and 110 bps Q/Q.
Outlook ahead: 1) As of now, the company is maintaining its guidance
of 15-20% AUM growth but highlighted that this could come down to
10-15% levels depending on how the macro shapes up, 2) NIMs can
potentially go down by ~50 bps as a base case and 100 bps in a bear case
post today's rate action, 3) Clarity on regulation regarding securitization
and NBFC norms are expected over the next quarter. Regarding
securitization, tighter norms on capital adequacy/KYC/seasoning norms
could potentially be in the offing. Overall, the company is still hopeful
of keeping its off balance sheet portfolio between 30 and 35% of its
AUM (vs. 40% currently and JPMe 29% by FY13).
No change to estimates: We are keeping our F12/13 estimates
unchanged which are 8-9% below consensus. Our estimates factor in
16% AUM growth for next year and a spread compression of 100 bps.
Our FY12E PAT is below company guidance of Rs14-15B.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Shriram Transport Finance Overweight
SRTR.BO, SHTF IN
1Q profits in line but a downside risk to outlook post rate hike
Shriram transport 1QFY12 PAT of Rs3.5B (+20% Y/Y, 2% Q/Q) was
largely in line with our estimate. However, near-term downside risks exist
post RBI’s latest rate action. The company in an analyst meet today
highlighted concerns on growth guidance and NIMs ahead. Policy
environment near term too is likely to be in a state of flux pending clarity
on securitization norms and overall NBFC regulations. While we continue
to be believers in the core “franchise” of the business, we think RBI's rate
“shock” today accentuates near-term headwinds.
Key financial highlights: 1) ROA maintained at 3.8% as NIM remained
stable Y/Y thanks to spreads locked in on securitized portfolio, 2) AUM
growth of 22% Y/Y was strong but sequentially has tapered off to 2%
Q/Q. Disbursement growth was 20% Y/Y, 3) Asset quality has slightly
deteriorated with Gross NPA moving to 2.66% from 2.64%.
Provisioning growth of 36% Y/Y outpaced loan growth. Overall ROE
respectable at 27.4% but down by 160 bps Y/Y and 110 bps Q/Q.
Outlook ahead: 1) As of now, the company is maintaining its guidance
of 15-20% AUM growth but highlighted that this could come down to
10-15% levels depending on how the macro shapes up, 2) NIMs can
potentially go down by ~50 bps as a base case and 100 bps in a bear case
post today's rate action, 3) Clarity on regulation regarding securitization
and NBFC norms are expected over the next quarter. Regarding
securitization, tighter norms on capital adequacy/KYC/seasoning norms
could potentially be in the offing. Overall, the company is still hopeful
of keeping its off balance sheet portfolio between 30 and 35% of its
AUM (vs. 40% currently and JPMe 29% by FY13).
No change to estimates: We are keeping our F12/13 estimates
unchanged which are 8-9% below consensus. Our estimates factor in
16% AUM growth for next year and a spread compression of 100 bps.
Our FY12E PAT is below company guidance of Rs14-15B.
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