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Shriram Transport Finance (SHTF IN; Mkt Cap USD4.3b, CMP Rs843, Buy)
Shriram Transport 2QFY11 PAT grew 44% YoY to Rs3b (against our estimate of Rs3.1b) driven by ~43% YoY growth in net income (including income from securitization). This was led by disbursements growth of 28% YoY and improvement in NIMs (on AUM) by 113bp YoY and 20bp QoQ to 8.34%. Growth in AUM was 23% YoY at Rs317b. Key highlights:
- SHTF reported 2QFY11 PAT growth of 44.1% YoY (against our estimate of 51% YoY) at Rs3b.
- Net income (including income from securitization) was up 42.8% YoY at Rs7.5b. NIMs on AUM rose to 8.34% v/s 7.21% in 2QFY10 and 8.13% in 1QFY11.
- Disbursements during the quarter increased 27.6% YoY to Rs45.7b. During the quarter, SHTF securitized Rs25.5b of the loan portfolio.
- AUM at the end of 2QFY11 was Rs317b up 23% YoY.
- GNPAs were sequentially stable at 2.54% and the management is using its strong profitability to enhance PCR (currently 81%). NNPAs at the end of quarter were 0.49% v/s 0.44% a quarter earlier.
Earning visibility strong; maintain Buy: We believe improvement in the economic scenario will keep business momentum strong and robust operating parameters will drive profitability. We expect SHTF will post EPS of Rs59 in FY11 and Rs70 in FY12. BV will be Rs218 in FY11E and Rs275 in FY12E. The stock trades at 3.1x FY12E BV and 12x FY12E EPS. RoAs are expected to be over 5% and RoEs will be ~30% over FY11-12. Maintain Buy with a target price of Rs960 (3.5x FY12E BV and 14x implied P/E).
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