Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
SHRIRAM TRANSPORT FINANCE CO LTD (STFC)
PRICE: RS.557 RECOMMENDATION: ACCUMULATE
TARGET PRICE: RS.580 FY13 P/E: 9.1X; P/ABV: 2.0X
q During Q2FY12, STFC reported net income slightly higher than our expectations
largely aided by robust securitization income; NIM came at 8.19%
(Q2FY12) supported by huge securitization done during Q4FY11. Net
profit was flat YoY at Rs.3.0 bn on back of higher provisions and writeoffs
(Rs.2.32 bn in Q2FY12 as against Rs.1.23 bn in Q2FY11) on account of
mining issues in Karnataka.
q Securitization was lower at Rs.4.93 bn during Q2FY12. Although
securitization was muted during Q2FY12, income from earlier
securitisation deals are flowing in; disbursement was moderate at 5.0%
during Q2FY12. STFC witnessed healthy AUM growth (20.1% YoY) during
Q2FY12 where old CVs segment constitutes ~75% of total AUM.
q Although STFC has more than three decade of experience in CV financing,
slowdown in CV cycle is likely to put pressure on its asset quality as
well as demand for loans, going forward. Further, unclear regulatory
stance on securitization will continue to put pressure on its borrowing
costs. We believe it would be exigent for them to transfer the rate hike
to borrowers in the slowing CV cycle, thus impact their spread.
q We are further moderating the growth assumption for FY12-13 (10% in
FY12E and 15% in FY13) and downward revising the earnings estimate
for FY12/13. We are modelling earnings to grow at 4.6% CAGR during
FY11-13E with EPS and ABV coming at Rs.61.5 and Rs.284.5, respectively
during FY13E.
q At CMP, stock trades at 9.1x its FY13E earnings and 2.0x its FY13E ABV.
We are assigning multiple of 2.0x one year forward ABV for the stock
and hence with limited upside left from current levels, we maintain ACCUMULATE
rating on the stock with revised TP of Rs.580 (Rs.760 earlier).
Net income (including securitization) came slightly higher than
our expectations largely aided by robust securitization; NIM (on
AUM basis) improved 58bps QoQ on back of huge securitization
done during Q4FY11.
During Q2FY12, STFC reported net income slightly higher than our expectations
largely aided by robust securitization income; Reported NIM (on AUM basis) improved
58bps QoQ to 8.19% during Q2FY12 mainly aided by huge securitization
(Rs.61.0 bn vs. 1.67 bn and Rs.4.93 bn during Q1FY12 and Q2FY12, respectively)
done during Q4FY11. NII including securitization rose 19.3% to Rs.8.35 bn during
Q2FY12; however, it was down by 4.4%, if we exclude the income from
securitization.
Net profit was flat YoY at Rs.3.0 bn on back of higher provisions and write-offs
(Rs.2.32 bn in Q2FY12 as against Rs.1.23 bn in Q2FY11) on account of mining issues
in Karnataka.
Securitization was lower at Rs.4.93 bn during Q2FY12 (regulatory
overhang continues!!); disbursement was moderate at 5.0%,
however, AUM growth was healthy at 20.1%.
STFC reported weak securitization at Rs.4.93 bn during Q2FY12 (regulatory overhang
continues!!) as compared to Rs.61.0 bn done during Q4FY12, although it was
better than Rs.1.67 bn done during Q1FY12. Although securitization was muted during
Q2FY12, income from securitisation rose 45.7% YoY during the same quarter as
income from earlier securitisation deals are flowing in.
Disbursement was moderate at 5.0% during Q2FY12 on back of 8.2% YoY decline
in new CVs even though old CVs grew at 9.2% YoY. STFC witnessed healthy AUM
growth (20.1% YoY) during Q2FY12 where old CVs segment constitutes ~75% of
total AUM.
Off balance sheet loans now stand at ~36% at the end of Q2FY12 as compared to
~40% witnessed at the end of Q1FY12 and ~45% witnessed at the end of Q4FY11.
Management had guided us earlier that the share of this segment would come
down in the range of 30-35% of overall AUM in the medium term.
Gross NPA deteriorated slightly QoQ, while net NPA improved
during the same period; STFC has continued to report healthy
coverage ratio (~85% at the end of Q2FY12)
Gross NPA deteriorated during Q2FY12 (9.4% QoQ; 26.3% YoY), while net NPA
improved during the same period (decline of 9.4% QoQ; only 1.0% YoY). In percentage
terms, gross NPA deteriorated to 2.69% at the end of Q2FY12 from 2.66%
at the end of Q1FY12 and 2.54% at the end of Q2FY11. However, net NPA improved
to 0.41% at the end of Q2FY12 from 0.49% each at the end of Q1FY12 as
well as Q2FY11.
STFC has continued to report healthy coverage ratio (~85% at the end of Q2FY12);
we believe this could provide cushion to the earnings volatility, if their asset quality
deteriorates, going forward. Provisions for bad debt grew sharply (92.7% YoY;
Rs.2.32 bn in Q2FY12 as against Rs.1.23 bn in Q2FY11) on account of mining issues
in Karnataka.
Stock is likely to underperform as overhang persists in terms of
regulatory uncertainty and slowing CV cycle
Although STFC has more than three decade of experience in CV financing, slowdown
in CV cycle is likely to put pressure on its asset quality as well as demand for
loans, going forward. Further, unclear regulatory stance on securitization will continue
to put pressure on its borrowing costs. We believe it would be exigent for them
to transfer the rate hike to borrowers in the slowing CV cycle, thus impact their
spread.
Valuation and recommendation
We are further moderating the growth assumption for FY12-13 (10% in FY12E and
15% in FY13) and downward revising the earnings estimate for FY12/13. We are
modelling earnings to grow at 4.6% CAGR during FY11-13E with EPS and ABV coming
at Rs.61.5 and Rs.284.5, respectively during FY13E.
We had earlier downgraded the stock to ACCUMULATE; we further cut the TP to
Rs.580 (Rs.760 earlier) as stock is likely to underperform as overhang persists in
terms of regulatory uncertainty and slowing CV cycle. At CMP, stock trades at 9.1x
its FY13E earnings and 2.0x its FY13E ABV. We are assigning multiple of 2.0x one
year forward ABV for the stock and hence with limited upside left from current levels,
we maintain ACCUMULATE rating on the stock.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
SHRIRAM TRANSPORT FINANCE CO LTD (STFC)
PRICE: RS.557 RECOMMENDATION: ACCUMULATE
TARGET PRICE: RS.580 FY13 P/E: 9.1X; P/ABV: 2.0X
q During Q2FY12, STFC reported net income slightly higher than our expectations
largely aided by robust securitization income; NIM came at 8.19%
(Q2FY12) supported by huge securitization done during Q4FY11. Net
profit was flat YoY at Rs.3.0 bn on back of higher provisions and writeoffs
(Rs.2.32 bn in Q2FY12 as against Rs.1.23 bn in Q2FY11) on account of
mining issues in Karnataka.
q Securitization was lower at Rs.4.93 bn during Q2FY12. Although
securitization was muted during Q2FY12, income from earlier
securitisation deals are flowing in; disbursement was moderate at 5.0%
during Q2FY12. STFC witnessed healthy AUM growth (20.1% YoY) during
Q2FY12 where old CVs segment constitutes ~75% of total AUM.
q Although STFC has more than three decade of experience in CV financing,
slowdown in CV cycle is likely to put pressure on its asset quality as
well as demand for loans, going forward. Further, unclear regulatory
stance on securitization will continue to put pressure on its borrowing
costs. We believe it would be exigent for them to transfer the rate hike
to borrowers in the slowing CV cycle, thus impact their spread.
q We are further moderating the growth assumption for FY12-13 (10% in
FY12E and 15% in FY13) and downward revising the earnings estimate
for FY12/13. We are modelling earnings to grow at 4.6% CAGR during
FY11-13E with EPS and ABV coming at Rs.61.5 and Rs.284.5, respectively
during FY13E.
q At CMP, stock trades at 9.1x its FY13E earnings and 2.0x its FY13E ABV.
We are assigning multiple of 2.0x one year forward ABV for the stock
and hence with limited upside left from current levels, we maintain ACCUMULATE
rating on the stock with revised TP of Rs.580 (Rs.760 earlier).
Net income (including securitization) came slightly higher than
our expectations largely aided by robust securitization; NIM (on
AUM basis) improved 58bps QoQ on back of huge securitization
done during Q4FY11.
During Q2FY12, STFC reported net income slightly higher than our expectations
largely aided by robust securitization income; Reported NIM (on AUM basis) improved
58bps QoQ to 8.19% during Q2FY12 mainly aided by huge securitization
(Rs.61.0 bn vs. 1.67 bn and Rs.4.93 bn during Q1FY12 and Q2FY12, respectively)
done during Q4FY11. NII including securitization rose 19.3% to Rs.8.35 bn during
Q2FY12; however, it was down by 4.4%, if we exclude the income from
securitization.
Net profit was flat YoY at Rs.3.0 bn on back of higher provisions and write-offs
(Rs.2.32 bn in Q2FY12 as against Rs.1.23 bn in Q2FY11) on account of mining issues
in Karnataka.
Securitization was lower at Rs.4.93 bn during Q2FY12 (regulatory
overhang continues!!); disbursement was moderate at 5.0%,
however, AUM growth was healthy at 20.1%.
STFC reported weak securitization at Rs.4.93 bn during Q2FY12 (regulatory overhang
continues!!) as compared to Rs.61.0 bn done during Q4FY12, although it was
better than Rs.1.67 bn done during Q1FY12. Although securitization was muted during
Q2FY12, income from securitisation rose 45.7% YoY during the same quarter as
income from earlier securitisation deals are flowing in.
Disbursement was moderate at 5.0% during Q2FY12 on back of 8.2% YoY decline
in new CVs even though old CVs grew at 9.2% YoY. STFC witnessed healthy AUM
growth (20.1% YoY) during Q2FY12 where old CVs segment constitutes ~75% of
total AUM.
Off balance sheet loans now stand at ~36% at the end of Q2FY12 as compared to
~40% witnessed at the end of Q1FY12 and ~45% witnessed at the end of Q4FY11.
Management had guided us earlier that the share of this segment would come
down in the range of 30-35% of overall AUM in the medium term.
Gross NPA deteriorated slightly QoQ, while net NPA improved
during the same period; STFC has continued to report healthy
coverage ratio (~85% at the end of Q2FY12)
Gross NPA deteriorated during Q2FY12 (9.4% QoQ; 26.3% YoY), while net NPA
improved during the same period (decline of 9.4% QoQ; only 1.0% YoY). In percentage
terms, gross NPA deteriorated to 2.69% at the end of Q2FY12 from 2.66%
at the end of Q1FY12 and 2.54% at the end of Q2FY11. However, net NPA improved
to 0.41% at the end of Q2FY12 from 0.49% each at the end of Q1FY12 as
well as Q2FY11.
STFC has continued to report healthy coverage ratio (~85% at the end of Q2FY12);
we believe this could provide cushion to the earnings volatility, if their asset quality
deteriorates, going forward. Provisions for bad debt grew sharply (92.7% YoY;
Rs.2.32 bn in Q2FY12 as against Rs.1.23 bn in Q2FY11) on account of mining issues
in Karnataka.
Stock is likely to underperform as overhang persists in terms of
regulatory uncertainty and slowing CV cycle
Although STFC has more than three decade of experience in CV financing, slowdown
in CV cycle is likely to put pressure on its asset quality as well as demand for
loans, going forward. Further, unclear regulatory stance on securitization will continue
to put pressure on its borrowing costs. We believe it would be exigent for them
to transfer the rate hike to borrowers in the slowing CV cycle, thus impact their
spread.
Valuation and recommendation
We are further moderating the growth assumption for FY12-13 (10% in FY12E and
15% in FY13) and downward revising the earnings estimate for FY12/13. We are
modelling earnings to grow at 4.6% CAGR during FY11-13E with EPS and ABV coming
at Rs.61.5 and Rs.284.5, respectively during FY13E.
We had earlier downgraded the stock to ACCUMULATE; we further cut the TP to
Rs.580 (Rs.760 earlier) as stock is likely to underperform as overhang persists in
terms of regulatory uncertainty and slowing CV cycle. At CMP, stock trades at 9.1x
its FY13E earnings and 2.0x its FY13E ABV. We are assigning multiple of 2.0x one
year forward ABV for the stock and hence with limited upside left from current levels,
we maintain ACCUMULATE rating on the stock.
No comments:
Post a Comment