Quick Pointers:
- Improvement in Asset Quality - Stage 2 at 10.6% vs 11.6% in Q3'22 and Stage 3 at 7.0% vs 8.4% in Q3'22
SHTF reported strong set of earnings in Q4FY22 (PAT up 59.6% QoQ/43.9% YoY). Lower provisions and strong NII growth led to beat in earnings. Good loan traction (2.0% QoQ/8.4%YoY) led by used CVs (up 2.8%QoQ/13.0%YoY) now forming 93% of overall loans up from 92% in Q3'22 translated into better NII (up 11.5%QoQ/19.3%YoY). GNPA/stage 3 at 7.07% dropped by 133 bps QoQ, given improvement in collection efficiency and write-offs (Rs7.9bn). We believe company can target strong growth in the coming quarters, with improvement in asset quality.
Going forward, re-rating from current levels would be an outcome of improvement of AUM from new vehicle sales (which saw a 5.5% QoQ de-growth, the only negative of this quarter results) and consolidating strong performance in used vehicle sales. With growth picking up and lower credit costs, we revise out NII/Profit estimates for FY23 by 6%/10% and for FY24 by 9%/15%. We reiterate 'BUY' rating and value SHTF at 1.5x PABV Sep'23E increasing our target price to INR Rs1,522 from INR 1,453.
Close to double digit annual growth for FY22; NIMs show strong improvement: AUMs at Rs1270bn continue to maintain ~2% QoQ growth run-rate for 4 quarters in a row now. Used vehicle finance share inched up to 93.0% (92.3% share in Q3FY22) growing 2.8%QoQ, aided overall AUM traction. Disbursements stood healthy at year ago levels, although new vehicle sales disbursements still not very strong. Company is confident that new vehicle AUM will show improvement going forward plus disbursement have also picked up. Calculated/Reported NIM's are improving on back of strong used vehicle AUM growth to 8.03%/6.96% in Q4 from 7.4%/6.7% a big positive. We expect SHTF to clock reported NIM's of 6.5-6.6% over FY23-24 as cost of fund will slightly inch up on rising rates. Company continues to maintain liquidity of Rs 177.09bn and a liquidity coverage ratio of 148.7% as a precaution for next wave of Covid and geo political tensions. Management expects to start withdrawing excess liquidity from Q1'23.
Asset quality improved; maintain BUY:. PCR on stage 3 declined to 50.0% from 50.3% in Q3'22. Stage 2 declined 118bps to 11.6%, Stage 3 reduced by 130bps to 7.1%. Movement in stage 2 assets trend downwards on QoQ basis as collections were strong during the quarter. Going forward we feel asset quality can further improve and hence estimate GNPA forecasts at 6.8%/6.5% over FY23/24E. Company has revised its process of NPA classification based on latest RBI classification. While RoAs (2.2-2.4%+ over FY23-24) have begun to improve and RoEs holding up (12%-14% levels). Maintain "BUY" rating.
Shares of Shriram Transport Finance Company Limited was last trading in BSE at Rs. 1202.45 as compared to the previous close of Rs. 1143.60. The total number of shares traded during the day was 256883 in over 11346 trades.
The stock hit an intraday high of Rs. 1238.95 and intraday low of 1175.00. The net turnover during the day was Rs. 312725430.00. |
