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Shriram Transport Finance
1Q strong, but cut earnings
and PO on macro headwinds
„1Q11: Earnings beat est by 4%; growth strong, margins up
STFC reported earnings of Rs3.5bn, a +20% yoy growth and +4% ahead of
estimates. Topline was 2% ahead of est. and grew +20% yoy driven by volume
growth of 22% yoy and margins expanding ~6bps yoy to 7.9%. Moreover, qoq
margins (as restated) now stand expanded by +25bps owing to utilization of cash
balances (vs. borrowings) in 1Q and full benefit from securitization (better
spreads) done in 4QFY11 (Rs61bn).
AUM growth strong; capital and asset quality comfortable
STFC’s AUM growth was strong at 22% yoy. More importantly, disbursement
growth also strong at 20% yoy, but used CV disb. growth weak (~11% yoy).
Although, positive is that within disb., the share of used CV disb. has grown to
78% vs. 72% in 4Q. Capital comfortable at ~23.4% (Tier 1 at ~16%); securitization
adjusted CAR at +19-20%. While absolute gross NPLs increased by 14% qoq (net
by 46%), it was partly explained by seasonality issue. Moreover, asset quality
remains still very manageable, with STFC’s net at <0.5% and cover still at ~82%.
Cut EPS / PO on macro headwinds and regulatory overhang
While 1Q earnings were stronger than estimated, we have nevertheless factored
in the macro headwinds (rising rates to hurt CV demand) and cut volume (AUM)
growth to ~16% (vs. ~19%). Accordingly, we cut our earnings by +4/6% for
FY12/13. But we still estimate earnings to grow by +20% through FY12/13.
Hence, we cut our PO to Rs850 factoring in persistent macro headwinds and
regulatory uncertainty. We, however, maintain Buy (+25% upside), as structurally
1) STFC’s remains well positioned owing to its differentiated business model and
skill sets and 2) still likely to deliver RoAs of +4.5-5.0% and RoEs of +26-27%.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Shriram Transport Finance
1Q strong, but cut earnings
and PO on macro headwinds
„1Q11: Earnings beat est by 4%; growth strong, margins up
STFC reported earnings of Rs3.5bn, a +20% yoy growth and +4% ahead of
estimates. Topline was 2% ahead of est. and grew +20% yoy driven by volume
growth of 22% yoy and margins expanding ~6bps yoy to 7.9%. Moreover, qoq
margins (as restated) now stand expanded by +25bps owing to utilization of cash
balances (vs. borrowings) in 1Q and full benefit from securitization (better
spreads) done in 4QFY11 (Rs61bn).
AUM growth strong; capital and asset quality comfortable
STFC’s AUM growth was strong at 22% yoy. More importantly, disbursement
growth also strong at 20% yoy, but used CV disb. growth weak (~11% yoy).
Although, positive is that within disb., the share of used CV disb. has grown to
78% vs. 72% in 4Q. Capital comfortable at ~23.4% (Tier 1 at ~16%); securitization
adjusted CAR at +19-20%. While absolute gross NPLs increased by 14% qoq (net
by 46%), it was partly explained by seasonality issue. Moreover, asset quality
remains still very manageable, with STFC’s net at <0.5% and cover still at ~82%.
Cut EPS / PO on macro headwinds and regulatory overhang
While 1Q earnings were stronger than estimated, we have nevertheless factored
in the macro headwinds (rising rates to hurt CV demand) and cut volume (AUM)
growth to ~16% (vs. ~19%). Accordingly, we cut our earnings by +4/6% for
FY12/13. But we still estimate earnings to grow by +20% through FY12/13.
Hence, we cut our PO to Rs850 factoring in persistent macro headwinds and
regulatory uncertainty. We, however, maintain Buy (+25% upside), as structurally
1) STFC’s remains well positioned owing to its differentiated business model and
skill sets and 2) still likely to deliver RoAs of +4.5-5.0% and RoEs of +26-27%.
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