Shriram Transport Finance (SHTF) posted a PAT of ~INR3.5b for 3QFY13, up 14%
YoY and 2% QoQ. While operating profit was in line with our estimate, marginally
higher than estimated provisions led to PAT being 3% lower than estimated.
After the muted AUM growth in FY12 (standalone: 11%; consolidated: 15%),
there has been a sharp pick-up in YTD FY13. Sequential AUM growth has
increased from an average of 2.5% in FY12 to 5%+ in each of the last three
quarters. The major positive surprise over the last two quarters has come
from sharp improvement in disbursements. AUM mix was stable QoQ, with
the ratio of on and off balance sheet AUM at 66:34.
NIM (on AUM) declined 15bp QoQ to 7.52%, led by (1) pressure on
securitization yield, and (2) build-up of excess liquidity on the balance sheet.
Asset quality remained healthy, with GNPA at 2.89% and PCR at ~80%.
Securitization picked up during the quarter - INR30b v/s INR4b in 1HFY13.
Higher securitization led (i) impact on CAR (down 130bp QoQ) and (ii) higher
liquid investment in BS (20% of total assets v/s 11% a quarter ago).
In 9MFY13, subsidiaries contributed 7% of consolidated PAT v/s 4% in FY12.
Valuation and view: Capitalizing on its niche customer base (providing pricing
power), falling interest rates, and increasing securitization will help SHTF to
keep NIM in a narrow band of 7.5-8%. With the sharp pick-up in disbursements in
YTD FY13, we expect AUM growth to remain healthy at 18% for standalone
operations and 20% for consolidated. While SHTF's return ratios have moderated
relative to historical trends, we expect them to remain healthy, with RoA of
2.7% and RoE of 21%+ over FY12-15. Maintain Buy .
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