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CD Equisearch P
Equities Derivatives Commoditie
Shriram Transport Finance Company Ltd
No. of shares (crore) 22.7
Mkt cap (Rs crs) 24324
Current price (FV. 10) 1045
Price target (Rs) 1237
52 week H/L (Rs.) 1224/549
Book Value (Rs.) 402
P/BV (FY15e/16e) 2.6/2.2
P/E (FY15e /16e) 17.3/15.1
BSE Code 511218
NSE Code SRTRANSFIN
Bloomberg SHTF IN
Daily volume (avg. weekly) 212760
Shareholding pattern %
Promoters 26.05
MFs / Banks / FIs 3.35
Foreign 52.49
Govt. Holding 0.00
Non-Promoter Corp. 11.41
Total Public 6.7
Total 100.00
As on Sep 30, 2014
Recommendation
Accumulate
Analyst
Priyanka Somani
Phone: + 91 (33) 3027 3043
E- mail: [email protected]
Figures in Rs crs
Net Interest Income
Non Interest Income
Pre-Provision Profits
PBDT
Net Profit
EPS (F.V.10)
EPS growth (%)
Pvt Ltd
ities Distribution of Mutual Funds Dis
Ltd.
SRTRANSFIN
FY12 FY13 FY14
3442.92 3719.38 3751.54
204.79 237.64 526.44
2750.62 3057.62 3216.46
1974.89 2185.38 2003.25
1308.81 1463.95 1357.94
57.86 64.52 59.85
7.5 11.5 -7.3
Company Background
Established in 1979, Shriram Transport Finance Company Ltd is
India’s leading non banking financial company
competitive advantages in pre-owned commercial vehicle
financing (especially 5-12 year old vehicles).
Highlights
• Strong competitive edge and track record in pre
financing (25% market share) is rooted in its strong customer
relationships, expertise and experience in pre
valuation and strong intelligence. Given , that it lends primarily
to small road transport operators (SRTOs) and first time users
(FTUs) , who have low credit profile and may not have a numb
of necessary documents, this experti
company’s AUM has recorded strong 30% CAGR over the past
decade while maintaining credit costs at manageable levels.
Rural initiatives and newer products/business will
• The company is increasing in rural reach to capt
in penetration of CVs in rural areas driven by better road
infrastructure and higher goods demand due to rising incomes,
freight rates and falling diesel prices and interest rates.
• We expect expansion of assets under management, and
stabilizing return on equity and net interest income going
forward. Regulatory norms with respect to non performing
assets and securitization are to be monitored.
• The stock currently trades at 17.3 times FY15e earnings and 15.1
times FY16e earnings and seems rea
levels, however, in the light of pick up in credit demand from
last quarter of FY15 onwards , we recommend
with a target of Rs 1237 based on 18xFY16e earnings over a time
horizon of 6-12 months.
Jan 7, 2015
istribution of Life Insurance
FY15e FY16e
4091.54 4590.25
299.08 458.70
3286.03 3765.64
2023.60 2298.95
1365.48 1559.43
60.18 68.72
0.5 14.2
Established in 1979, Shriram Transport Finance Company Ltd is
India’s leading non banking financial company (NBFC) with strong
owned commercial vehicle (CV)
12 year old vehicles).
Strong competitive edge and track record in pre-owned CV
financing (25% market share) is rooted in its strong customer
experience in pre-owned CV
valuation and strong intelligence. Given , that it lends primarily
to small road transport operators (SRTOs) and first time users
(FTUs) , who have low credit profile and may not have a number
expertise gain significance. The
company’s AUM has recorded strong 30% CAGR over the past
decade while maintaining credit costs at manageable levels.
s and newer products/business will drive growth.
The company is increasing in rural reach to capture the increase
in penetration of CVs in rural areas driven by better road
infrastructure and higher goods demand due to rising incomes,
ates and falling diesel prices and interest rates.
We expect expansion of assets under management, and
izing return on equity and net interest income going
forward. Regulatory norms with respect to non performing
assets and securitization are to be monitored.
e stock currently trades at 17.3 times FY15e earnings and 15.1
times FY16e earnings and seems reasonably priced at these
levels, however, in the light of pick up in credit demand from
last quarter of FY15 onwards , we recommend ‘Accumulate’
with a target of Rs 1237 based on 18xFY16e earnings over a time
CD Equisearch Pvt Ltd
Equities Derivatives Commoditie
Market Share (target and current)
12 years +180bn
0-4 years 870bn
5-12 years,850bn
(Shriram Target)
Shriram
Transport(22%)
Other organized
financers(8%)
Unorganized
financers(70%)
Financial and Operational Dynamics of
Source: Crisil , STFC
Source: Crisil
2
CD Equisearch Pvt Ltd
ities Distribution of Mutual Funds Dist
Pre-owned Commercial Vehicle Industry
Pre-owned commercial vehicles segment has been the flagship
of the company over past three decades. The commercial vehicle
financing market size is estimated to be Rs. 1900 bn comprising of ~6mn
vehicles.
The Company is targeting the 5-12 year old pre
accounting for 44% market share in value terms and 43% in
terms with an addressable market opportunity of Rs.750 bn. The pre
owned vehicle market is largely unorganized and under penetrated with
60-65% market share with private financiers presenting enormous
business opportunity for a sustainable long term
tonne CV generally changes ownership four times in its life cycle. It
starts of on the long haul national highways, moves down to interstate
by the fifth year, further on to less than 300 km intercity routes and
finally goes on to local uses like garbage trucks after 13
changes of ownership create multiple financing options for financiers.
Financial and Operational Dynamics of CV Industry
2
CD Equisearch Pvt Ltd
istribution of Life Insurance
owned Commercial Vehicle Industry
owned commercial vehicles segment has been the flagship segment
past three decades. The commercial vehicle
financing market size is estimated to be Rs. 1900 bn comprising of ~6mn
12 year old pre-owned vehicle segment
accounting for 44% market share in value terms and 43% in volume
terms with an addressable market opportunity of Rs.750 bn. The pre-
owned vehicle market is largely unorganized and under penetrated with
65% market share with private financiers presenting enormous
business opportunity for a sustainable long term growth. A typical nine
tonne CV generally changes ownership four times in its life cycle. It
starts of on the long haul national highways, moves down to interstate
by the fifth year, further on to less than 300 km intercity routes and
ocal uses like garbage trucks after 13-14 years. These
changes of ownership create multiple financing options for financiers.
CD Equisearch Pvt Ltd
Equities Derivatives Commoditie
Segment-wise
Volumes
Segments FY10 FY11 FY12 FY13
LCVs 287,777 3,61,846 460,831 524,887 432,111
MHCV 244,944 323,059 348,701 268,263 200,627
Total 532,721 684,905 809,532 793,150 632,738
The rates were increased a couple of times to counter the rising inflation, thereby leading to turning off the
tap to bare minimum when it came to
the infrastructure sectors witnessed lower traction in terms of activity, thereby leading to lukewarm
economic activity across key states.
2013-14 was among the most challenging year
commercial vehicle industry is not new to downturns.. The medium and heavy truck segment
accounts for the bulk of the industry’s load
further by 25 per cent in 2013-14.
The Society of Indian Automobile Manufacturers (SIAM) has reported that the overall domestic sales of
vehicles during the year 2013-14 grew marginally by 3.53% as compared to year 2012
sales of passenger vehicles declined by 6.05%.
registered negative growth of 25.33% and Light Commercia
Wheelers sales declined by 10.90%.
Passenger Carriers and Goods Carriers decline
registered growth of 7.31%. The heavy goods transport vehicles sector faced many challenges
idle time due to degrowth in manufacturing, mining and quarrying sectors, pressure on margins as the
freight rate increases were not commensurate with fuel price increases. This resulted into lower demand for
credit from urban areas. The rural and semi
growth in food grain production.
The real GDP growth rate is projected to pick up to a range of 5% to 6% in 2014
supply bottlenecks and progress on the implementation of stalled projects already cleared should
contribute to growth.
Source: STFC
3
CD Equisearch Pvt Ltd
ities Distribution of Mutual Funds Dist
FY14
432,111
200,627
632,738
Economic performance of the commercial vehicle
industry (FY 2013-14)
GDP growth showed a sluggish growth in the year 2013
14.The uneven political climate led to stagnant economical
scenario – thereby leading to lowe
investments in infrastructure and core industries
leading to lower capital expenditure and le
The process for new licenses was set into
onset of the new Government.
The rates were increased a couple of times to counter the rising inflation, thereby leading to turning off the
tap to bare minimum when it came to funding at competitive rates by the banks. The core industries and
the infrastructure sectors witnessed lower traction in terms of activity, thereby leading to lukewarm
among the most challenging year for the Indian commercial vehicles sector. India’s cycle
commercial vehicle industry is not new to downturns.. The medium and heavy truck segment
accounts for the bulk of the industry’s load-carrying capacity - shrank 26 per cent in 2012
The Society of Indian Automobile Manufacturers (SIAM) has reported that the overall domestic sales of
14 grew marginally by 3.53% as compared to year 2012
senger vehicles declined by 6.05%. Medium & Heavy Commercial Vehicles (M&HCVs)
th of 25.33% and Light Commercial Vehicles also dropped by 17.62%. Three
Passenger Carriers and Goods Carriers declined by 12.74% and 2.53% respectively.
registered growth of 7.31%. The heavy goods transport vehicles sector faced many challenges
growth in manufacturing, mining and quarrying sectors, pressure on margins as the
eight rate increases were not commensurate with fuel price increases. This resulted into lower demand for
credit from urban areas. The rural and semi-urban credit demand was maintained due to impressive
rate is projected to pick up to a range of 5% to 6% in 2014-15. Easing of domestic
supply bottlenecks and progress on the implementation of stalled projects already cleared should
3
CD Equisearch Pvt Ltd
istribution of Life Insurance
Economic performance of the commercial vehicle
growth showed a sluggish growth in the year 2013-
The uneven political climate led to stagnant economical
thereby leading to lower infusion of
infrastructure and core industries – also
enditure and less job creation.
r new licenses was set into motion, with the
The rates were increased a couple of times to counter the rising inflation, thereby leading to turning off the
funding at competitive rates by the banks. The core industries and
the infrastructure sectors witnessed lower traction in terms of activity, thereby leading to lukewarm
e Indian commercial vehicles sector. India’s cycle-prone
commercial vehicle industry is not new to downturns.. The medium and heavy truck segment - which
shrank 26 per cent in 2012-13 and shrank
The Society of Indian Automobile Manufacturers (SIAM) has reported that the overall domestic sales of
14 grew marginally by 3.53% as compared to year 2012-13 (last year). The
Medium & Heavy Commercial Vehicles (M&HCVs)
l Vehicles also dropped by 17.62%. Three
d by 12.74% and 2.53% respectively. Two Wheelers
registered growth of 7.31%. The heavy goods transport vehicles sector faced many challenges in terms of
growth in manufacturing, mining and quarrying sectors, pressure on margins as the
eight rate increases were not commensurate with fuel price increases. This resulted into lower demand for
urban credit demand was maintained due to impressive
15. Easing of domestic
supply bottlenecks and progress on the implementation of stalled projects already cleared should
CD Equisearch Pvt Ltd
Equities Derivatives Commoditie
Company Overview
Established in 1979, Shriram Transport Finance Co Ltd. is the largest asset financing NBFC with assets under
management of Rs 53,102.11crore. The company
market share of 20-25% in the strategic segment of 5
network of 654 branches and partnership with over
owned commercial vehicle industry and thereby ensured inclusive growth to its st
lakh first time users and driver-turned-owners.
Subsidiary
Construction Equipment Business
The company capitalizes upon the trend among small road transport operators to diversify into construction
equipment as the second income opportunity through its subsidiary
offers a wide range of pre-owned and new commercial construction e
etc. to first time users, including the existing customers. During 2013
topline of Rs. 543.95 crore and a net profit of Rs.86.83 crore. The company had an
March 31, 2014.
Auto malls
Shriram Automall India Limited, a subsidiary of the
during 2013-14. Automall is the first-of-its
buyers and sellers. This platform has become a unique mechanism to ensure price discovery of the pre
vehicles. Automall offers absolute transparency in valuation process, backed with assured title, quality and
performance of the vehicle to the buyers and assured payment to the sellers.
disbursements (by volume) are from customers who have bought vehicles through automalls.
Investment Rationale
Shriram Transport’s leadership position in pre
(about 22% market share) is rooted in its strong customer relationships,
expertise and experience in pre owned CV valuation and strong local
intelligence. Given that it lends primarily to small road transport
operators (SRTOs) and first time u
profile and may not have a numbe
expertise gain significance. Moreover the company is increasing its rural
reach to capture the increase in penetration of CVs in rural areas driven
by better
inco
The company has 700 branch offices, 635 rural centres and tie up with
approximately 500 private financiers. Also, STFC has 16410 employees
(pan India) including 9681 field officers.
4
CD Equisearch Pvt Ltd
ities Distribution of Mutual Funds Dist
Established in 1979, Shriram Transport Finance Co Ltd. is the largest asset financing NBFC with assets under
management of Rs 53,102.11crore. The company is a leader in organized financing of pre
25% in the strategic segment of 5-12 year old trucks. Having a pan
branches and partnership with over 500 private financiers, the company has revitalized the pre
cle industry and thereby ensured inclusive growth to its strong customer base of over 6
owners.
upon the trend among small road transport operators to diversify into construction
equipment as the second income opportunity through its subsidiary - Shriram Equipment Finance Co. Ltd. It
owned and new commercial construction equipment including forklifts, cranes, loaders
etc. to first time users, including the existing customers. During 2013-14, Shriram Equipment Finance registered a
topline of Rs. 543.95 crore and a net profit of Rs.86.83 crore. The company had an AUM of Rs. 3
Limited, a subsidiary of the company, operates 32 Automalls, 11 of which were opened
its-kind mall that offers a common meeting platform for
buyers and sellers. This platform has become a unique mechanism to ensure price discovery of the pre
vehicles. Automall offers absolute transparency in valuation process, backed with assured title, quality and
to the buyers and assured payment to the sellers. Nearly 30% of Shriram Transport’s
disbursements (by volume) are from customers who have bought vehicles through automalls.
Investment Rationale
Pioneer in pre-owned commercial vehicle financing sector
Shriram Transport’s leadership position in pre
(about 22% market share) is rooted in its strong customer relationships,
expertise and experience in pre owned CV valuation and strong local
intelligence. Given that it lends primarily to small road transport
operators (SRTOs) and first time users (FTUs) , who have low credit
profile and may not have a number of necessary documents , this
expertise gain significance. Moreover the company is increasing its rural
reach to capture the increase in penetration of CVs in rural areas driven
by better road infrastructure and higher goods demand due to rising
incomes.
The company has 700 branch offices, 635 rural centres and tie up with
approximately 500 private financiers. Also, STFC has 16410 employees
(pan India) including 9681 field officers.
4
CD Equisearch Pvt Ltd
istribution of Life Insurance
Established in 1979, Shriram Transport Finance Co Ltd. is the largest asset financing NBFC with assets under
ed financing of pre-owned trucks with a
year old trucks. Having a pan-India presence with a
500 private financiers, the company has revitalized the pre-
rong customer base of over 6
upon the trend among small road transport operators to diversify into construction
Shriram Equipment Finance Co. Ltd. It
quipment including forklifts, cranes, loaders
14, Shriram Equipment Finance registered a
AUM of Rs. 3,418.39 crore as on
company, operates 32 Automalls, 11 of which were opened
kind mall that offers a common meeting platform for the potential
buyers and sellers. This platform has become a unique mechanism to ensure price discovery of the pre-owned
vehicles. Automall offers absolute transparency in valuation process, backed with assured title, quality and
Nearly 30% of Shriram Transport’s
disbursements (by volume) are from customers who have bought vehicles through automalls.
owned commercial vehicle financing sector
Shriram Transport’s leadership position in pre-owned CV financing
(about 22% market share) is rooted in its strong customer relationships,
expertise and experience in pre owned CV valuation and strong local
intelligence. Given that it lends primarily to small road transport
sers (FTUs) , who have low credit
r of necessary documents , this
expertise gain significance. Moreover the company is increasing its rural
reach to capture the increase in penetration of CVs in rural areas driven
road infrastructure and higher goods demand due to rising
The company has 700 branch offices, 635 rural centres and tie up with
approximately 500 private financiers. Also, STFC has 16410 employees
CD Equisearch Pvt Ltd
Equities Derivatives Commoditie
Fundamentally Strong Financials
Source : CD Research
Assets under management on strong growth track
Consolidated assets under management (AUM) increased from Rs 55,250 crore in FY 2013
2014-15. The AUM consists of financing of medium and light commercial vehicles (MLCVs
(22%), Tractors (5.4%), others (3.4%) and heavy CVs (40%).
within next 2 years. As per Q2 FY15 results there has been a significant degrowth in the heavy vehicles segment as the
company is focused on growing more in mid and smaller vehicles segment. Moreover, the company is committed to
capturing semi urban and rural markets where heavy commercial vehicles are not much in use. Lastly, the economic
downtrend in 2013-14 led to slowdown in the industr
plying of heavy commercial vehicles.
Net interest income to grow as credit cost is expected to stabilize
The net interest income on consolidated basis was approximately Rs 3750 crore in FY 2013
we expect to increase by 9% and 12% in FY15 and FY16 respectively, as a function of stabilizing cost of borrowings
and increasing interest income , though the former is expected to make a relatively greater impact.
Consistency in asset quality
The company has been able to historically maintain its asset quality and the same is expected going forward. Gross
non-performing assets (NPA) and net non
provisioning may increase as the new RBI guideline has directed NBFCs to go with 90 days norm for recognizing
NPAs which were previously 180 days. As a result of which, going forwar
higher provisioning.
0
20000
40000
60000
80000
AUM AUM(off BS)
0200400600800
1000120014001600 Prov/write offRs Crs
Rs crs
5
CD Equisearch Pvt Ltd
ities Distribution of Mutual Funds Dist
under management on strong growth track
Consolidated assets under management (AUM) increased from Rs 55,250 crore in FY 2013
15. The AUM consists of financing of medium and light commercial vehicles (MLCVs
(22%), Tractors (5.4%), others (3.4%) and heavy CVs (40%). Going forward, we expect AUM to cross 65,000 crore
within next 2 years. As per Q2 FY15 results there has been a significant degrowth in the heavy vehicles segment as the
on growing more in mid and smaller vehicles segment. Moreover, the company is committed to
capturing semi urban and rural markets where heavy commercial vehicles are not much in use. Lastly, the economic
14 led to slowdown in the industrial and mining activity, which is responsible for generating
Net interest income to grow as credit cost is expected to stabilize
The net interest income on consolidated basis was approximately Rs 3750 crore in FY 2013
we expect to increase by 9% and 12% in FY15 and FY16 respectively, as a function of stabilizing cost of borrowings
ome , though the former is expected to make a relatively greater impact.
The company has been able to historically maintain its asset quality and the same is expected going forward. Gross
non-performing assets stood at 3.83% and 0.83% respectively. Going forward
provisioning may increase as the new RBI guideline has directed NBFCs to go with 90 days norm for recognizing
NPAs which were previously 180 days. As a result of which, going forward profitability may be impacted due to
AUM(off BS)
Prov/write off
Source : CD Research
0 2000 4000
2010
2011
2012
2013
2014
2015e
2016e
Rs crs
0.0
2.0
4.0
6.0
8.0
2010 2011 2012 2013 2014
%
5
CD Equisearch Pvt Ltd
istribution of Life Insurance
Consolidated assets under management (AUM) increased from Rs 55,250 crore in FY 2013-14 to Rs 58,800 crore in FY
15. The AUM consists of financing of medium and light commercial vehicles (MLCVs-29%), passenger vehicles
Going forward, we expect AUM to cross 65,000 crore
within next 2 years. As per Q2 FY15 results there has been a significant degrowth in the heavy vehicles segment as the
on growing more in mid and smaller vehicles segment. Moreover, the company is committed to
capturing semi urban and rural markets where heavy commercial vehicles are not much in use. Lastly, the economic
ial and mining activity, which is responsible for generating
The net interest income on consolidated basis was approximately Rs 3750 crore in FY 2013-14 , which going forward
we expect to increase by 9% and 12% in FY15 and FY16 respectively, as a function of stabilizing cost of borrowings
ome , though the former is expected to make a relatively greater impact.
The company has been able to historically maintain its asset quality and the same is expected going forward. Gross
assets stood at 3.83% and 0.83% respectively. Going forward
provisioning may increase as the new RBI guideline has directed NBFCs to go with 90 days norm for recognizing
d profitability may be impacted due to
4000 6000
NII
2014 2015e 2016e
NII/AUM
Prov/AUM
CD Equisearch Pvt Ltd
Equities Derivatives Commoditie
Diversified fund mix
The company holds a sound and secure funding profile. About 82% of the funds are borrowed from banks and
institutions while only 18% from retail investors (mainly through fixed deposits and public issue of Non Convertible
Debentures). The outstanding securitized asset
accounts for 28% of the total AUM (decrease from 35% in FY13)
superior asset quality through transparent and impactful processes have resulted i
economical financial alternative.
0% 50% 100%
FY09
FY10
FY11
FY12
FY13
FY14
Retail
Securitisation
Other InstitutionsSource : CD Research
Source : CD Research
0
1
2
3
4
5
2010 2011 2012 2013 2014 2015e
Gross NPA*
%
0
2000
4000
6000
8000
10000
12000
2010 2011 2012 2013 2014 2015e
Revenue
Net Profit
Rs Crs
6
CD Equisearch Pvt Ltd
ities Distribution of Mutual Funds Dist
holds a sound and secure funding profile. About 82% of the funds are borrowed from banks and
institutions while only 18% from retail investors (mainly through fixed deposits and public issue of Non Convertible
ed assets portfolio stood at Rs. 16,543 crore as on March 31, 2014
accounts for 28% of the total AUM (decrease from 35% in FY13). The steps initiated by the company to ensure
superior asset quality through transparent and impactful processes have resulted in expanding its realm of
100%
2015e 2016e
Net NPA*
2015e 2016e
Revenue
Net Profit
0.0
20.0
40.0
60.0
80.0
2010 2011 2012 2013
0 2000 4000
2010
2011
2012
2013
2014
2015e
2016e
Rs Crs
The securitization allows the company to mitigate the interest
risk by converting its floating liability to fixed price liability
but also enables the company to access low cost funds under
priority sector by RBI. However, due to the RBI guidelines we
expect the share of securitization to decrease further going
forward which will increase the cost of
net interest income.
Other borrowing instruments include term
deposits and subordinated debts.
The company enjoys ‘AA+’ credit rating from CARE and ‘AA/AA+’
from CRISIL.
Source: CD Research
6
CD Equisearch Pvt Ltd
istribution of Life Insurance
holds a sound and secure funding profile. About 82% of the funds are borrowed from banks and
institutions while only 18% from retail investors (mainly through fixed deposits and public issue of Non Convertible
s portfolio stood at Rs. 16,543 crore as on March 31, 2014, which
The steps initiated by the company to ensure
n expanding its realm of
2014 2015e 2016e
OPM (%) NPM(%)
6000 8000
Profit EBIT
The securitization allows the company to mitigate the interest
floating liability to fixed price liability
but also enables the company to access low cost funds under
priority sector by RBI. However, due to the RBI guidelines we
expect the share of securitization to decrease further going
t of borrowing, and stress
Other borrowing instruments include term loans, fixed
The company enjoys ‘AA+’ credit rating from CARE and ‘AA/AA+’
CD Equisearch Pvt Ltd
Equities Derivatives Commoditie
Source: STFC
0.0
2.0
4.0
6.0
8.0
10.0
12.0
2011 2012 2013 2014 2015e
Market Cap / Sales
EV/EBIDTA
0 20 40 60
2010
2012
2014
2016e
The pre-provision profits are expected to grow from Rs 3286 crore in FY15 to Rs 3766 crore in FY16. Income from
securitization declined by almost 50 % in FY14 and the downward trend is
in AUM will cause NII to rise substantially from 2016 onwards.
Return ratios namely ROE, ROCE, and ROA though may not achieve their peaks (as i
However as the economy is set to witness an upturn, which
as ROE in FY15 and FY16 to be around 15%
terms of profitability among peers of STFC, it comes across as t
Source: CD Research
7
CD Equisearch Pvt Ltd
ities Distribution of Mutual Funds Dist
2015e 2016e
Market Cap / Sales
80
EPS
0.0
5.0
10.0
15.0
20.0
25.0
2012 2013 2014
0.0
5.0
10.0
15.0
20.0
2011 2012 2013 2014
P / E P / BV
Source: CD Research
provision profits are expected to grow from Rs 3286 crore in FY15 to Rs 3766 crore in FY16. Income from
securitization declined by almost 50 % in FY14 and the downward trend is expected to continue. However, expansion
in AUM will cause NII to rise substantially from 2016 onwards.
Return ratios namely ROE, ROCE, and ROA though may not achieve their peaks (as in FY12) within next two years,
an upturn, which it will bring stability in returns. We expect ROCE as well
, while ROA to be around 2.4 %. Moreover, if we look at the valuations in
terms of profitability among peers of STFC, it comes across as the most fairly valued.
Capital Adequacy
The company’s capital adequacy ratio in 2013
percent. It has followed the trend retrospectively and the same
is expected to continue going forward.
requirements for NBFC, the minimum CAR is 15%. The
company maintains core capital (Tier 1 capital ratio) in the
range of 17.7%-18.9% and Tier 2 capital of about 4%.
Valuations and Profitability
Shriram Transport has historically received stable valuations
due to its fundamentally strong financial record and growth
prospects. For FY 2015 we expect the EPS to be at Rs 60.18 and
during 2016 to be at Rs 68.72 (growth of
7
CD Equisearch Pvt Ltd
istribution of Life Insurance
2015e 2016e
Capital
Adequacy Ratio
(%)
Tier 1 capital
ratio(%)
Tier 2 capital
ratio(%)
2014 2015e 2016e
provision profits are expected to grow from Rs 3286 crore in FY15 to Rs 3766 crore in FY16. Income from
expected to continue. However, expansion
n FY12) within next two years,
will bring stability in returns. We expect ROCE as well
while ROA to be around 2.4 %. Moreover, if we look at the valuations in
The company’s capital adequacy ratio in 2013-14 was 23.5
retrospectively and the same
is expected to continue going forward. As per RBI regulatory
requirements for NBFC, the minimum CAR is 15%. The
company maintains core capital (Tier 1 capital ratio) in the
18.9% and Tier 2 capital of about 4%.
Shriram Transport has historically received stable valuations
due to its fundamentally strong financial record and growth
For FY 2015 we expect the EPS to be at Rs 60.18 and
during 2016 to be at Rs 68.72 (growth of 52% in FY16).
CD Equisearch Pvt Ltd
Equities Derivatives Commoditie
Knowledge driven and relationship driven business m
Shriram Transport has developed strong relationships and customer base
within the truck community,
model.
Each product executive is assigned 100
credit assessment, collection
operators such as tyre financing
which not only generates additional business for Shriram Transport but also
helps keep a check on overall levera
handholds the customers in times of distress and allows them to carry out part
payment of EMI in case of shortfall of cash flows
These practices help the company develop strong customer loyalty. Nearly 20% of its
existing customers. The company has developed strong base of over 1 million which helps it generate repeat
business. The company has linked the performance incentives of product executives to the collections which enables
it in managing asset quality. Such business model is a
been able to manage the same.
Shriram has entered into partnerships and co
agreement, the partner helps in sourcing of business and prepares all necessary documentations for loan approval
and disbursement. Incomes (net of funding costs) as well as los
partner in same proportion. These tie ups help the company gain and leverage local intelligence and personal base of
the partner/private financier.
Growth in new products
Shriram Transport has been trying to ramp up financing in new products l
and construction equipment. However, slowdown in the overall economy has impacted the growth in financing these
new products but going forward, we expect these pro
grow as monsoon deficit narrows.
The wholly owned subsidiary of the company, namely, Shriram Contruction Equipment Ltd started financing
construction equipment in FY11. We expect the economic upturn to cause rapid AUM growth in the same.
Risks and Concerns
Shriram Transport is present in only commercial vehicle finance. The CV industry is cyclical and competition in the
CV finance industry has intensified. Further, the current outlook i
shown substantial degrowth as per Q2FY15 r
depend on their CV for generating income and may not have other sources to
the company has managed its risks well,
mining activity in southern states.
8
CD Equisearch Pvt Ltd
ities Distribution of Mutual Funds Dist
Knowledge driven and relationship driven business m
Shriram Transport has developed strong relationships and customer base
within the truck community, the company operates on a relationship
model.
Each product executive is assigned 100-150 customers
credit assessment, collections and caters to all the financing needs of truck
perators such as tyre financing, credit cards for diesel and
which not only generates additional business for Shriram Transport but also
helps keep a check on overall leverage to the borro
handholds the customers in times of distress and allows them to carry out part
payment of EMI in case of shortfall of cash flows.
These practices help the company develop strong customer loyalty. Nearly 20% of its yearly disbursements are to the
existing customers. The company has developed strong base of over 1 million which helps it generate repeat
business. The company has linked the performance incentives of product executives to the collections which enables
t in managing asset quality. Such business model is also prone to scalability issues; however Shriram Transport has
Shriram has entered into partnerships and co-financing arrangement with over 500 private financiers. Under t
agreement, the partner helps in sourcing of business and prepares all necessary documentations for loan approval
and disbursement. Incomes (net of funding costs) as well as losses, if any, are shared between the company and the
on. These tie ups help the company gain and leverage local intelligence and personal base of
Shriram Transport has been trying to ramp up financing in new products like tractors, small CVs, passenger
and construction equipment. However, slowdown in the overall economy has impacted the growth in financing these
new products but going forward, we expect these products to grow at a faster pace. Tractor financing is expected to
The wholly owned subsidiary of the company, namely, Shriram Contruction Equipment Ltd started financing
construction equipment in FY11. We expect the economic upturn to cause rapid AUM growth in the same.
ort is present in only commercial vehicle finance. The CV industry is cyclical and competition in the
Further, the current outlook in new CV financing (in which th
growth as per Q2FY15 results) remains unsteady. The company lends to risky borrowers who
depend on their CV for generating income and may not have other sources to meet the repayment obligation w
it has in the past been affected by sector-specific issues such as ban on
8
CD Equisearch Pvt Ltd
istribution of Life Insurance
Knowledge driven and relationship driven business model
Shriram Transport has developed strong relationships and customer base
pany operates on a relationship-based
mers. He/she takes care of
s and caters to all the financing needs of truck
, credit cards for diesel and bills discounting
which not only generates additional business for Shriram Transport but also
ge to the borrower. Further, he/she
handholds the customers in times of distress and allows them to carry out part
yearly disbursements are to the
existing customers. The company has developed strong base of over 1 million which helps it generate repeat
business. The company has linked the performance incentives of product executives to the collections which enables
however Shriram Transport has
financing arrangement with over 500 private financiers. Under this
agreement, the partner helps in sourcing of business and prepares all necessary documentations for loan approval
es, if any, are shared between the company and the
on. These tie ups help the company gain and leverage local intelligence and personal base of
, small CVs, passenger vehicles
and construction equipment. However, slowdown in the overall economy has impacted the growth in financing these
Tractor financing is expected to
The wholly owned subsidiary of the company, namely, Shriram Contruction Equipment Ltd started financing
construction equipment in FY11. We expect the economic upturn to cause rapid AUM growth in the same.
ort is present in only commercial vehicle finance. The CV industry is cyclical and competition in the
n new CV financing (in which the company has
. The company lends to risky borrowers who
meet the repayment obligation while
specific issues such as ban on
CD Equisearch Pvt Ltd
Equities Derivatives Commoditie
RBI has been focusing on tightening prudential norms for NBFCs to bring them at par with the banking industry. As
a result, the playing field between banks and NBFCs is getting leveled leading to increased competition as well as
lower profitability for NBFCs.
Cross Sectional Analysis
Asset Financing
NBFCs Equity CMP MCap
Shriram Trans. 227 1045 23712
M&M Financial 114 322 18371
Sundaram Finance* 111 1278 13978
Cholamandalam Inv 644 486 31248
Magma Fincorp 38 107 2019
0.0 20.0 40.0 60.0 80.0100.0
Shriram Transport Fin.
M&M Financial Services
Sundaram Finance*
Cholamandalam Inv
Magma Fincorp
OPM
%
*standalone, Mcap, sales, profit, equity in Rs crore
Source: CD Research
0.0 5.0 10.0
Shriram Transport …
M&M Financial …
Sundaram Finance*
Cholamandalam Inv
Magma Fincorp
P/BV Mk cap/ sales
9
CD Equisearch Pvt Ltd
ities Distribution of Mutual Funds Dist
RBI has been focusing on tightening prudential norms for NBFCs to bring them at par with the banking industry. As
the playing field between banks and NBFCs is getting leveled leading to increased competition as well as
Sales Profit OPM Mcap/
sales NPM ROA
8758 1262.7 72.1 2.7 14.4 2.2
5698 907.7 69.3 3.2 15.9 2.5
2341 456.3 82.0 6.0 19.5 2.9
3503 380.2 71.2 8.9 10.9 1.6
1943 161.8 58.7 1.0 8.3 1.1
0
2000
4000
6000
8000
10000
Shriram
Transport Fin.
M&M Financial
Services
Sundaram
Finance*
Cholamandalam
Sales
Rs Crs
The matrix displays financials and valuations of
financing companies. Shriram Transport Finance concentrates on
financing commercial vehicles only, whereas, other mentioned NBFCs
finance many other products like car loans, housing finance, gold loans
personal finance etc.
As far as CV financing is concerned, Shriram faces competition from
Cholamandalam Financial services, Magma Fincorp and Sundaram
Finance in 5-9 year segment while Shriram remains the dominant player
in the 9-12 year segment with slight competition from private financiers.
The yields are minimum in the 0-5 year segment where the dominant
players apart from the mentioned NBFCs are HDFC Bank, IndusInd
Bank and ICICI Bank.
15.0
Mk cap/ sales
9
CD Equisearch Pvt Ltd
istribution of Life Insurance
RBI has been focusing on tightening prudential norms for NBFCs to bring them at par with the banking industry. As
the playing field between banks and NBFCs is getting leveled leading to increased competition as well as
ROE Int
cov P/BV P/E
13.8 1.4 2.6 18.7
16.0 1.6 3.2 20.2
17.2 1.6 5.3 30.6
12.7 1.3 10.5 82.2
9.4 0.9 1.2 12.5
Cholamandalam
Inv
Magma Fincorp
Profit
s financials and valuations of the major asset
financing companies. Shriram Transport Finance concentrates on
as, other mentioned NBFCs
loans, housing finance, gold loans
As far as CV financing is concerned, Shriram faces competition from
Cholamandalam Financial services, Magma Fincorp and Sundaram
remains the dominant player
12 year segment with slight competition from private financiers.
5 year segment where the dominant
m the mentioned NBFCs are HDFC Bank, IndusInd
CD Equisearch Pvt Ltd
Equities Derivatives Commoditie
Financials
Consolidated Quarterly Results
Revenue from Operations
Other Income
Total Income
Total Expenditure
EBITDA (other income included)
Interest
Depreciation
PBT
Tax
Net Profit
Minority Interest
Associate Profit
Net Profit after MI
Extraordinary Item
Adjusted Net Profit
EPS (F.V. 10)
Segment Wise Quarterly Results
Segment Revenue
Financing Activities
Facilitation service division
Total Income
Segment Results
Financing Activities
Facilitation service division
Less : Interest on facilitation service
division
Total PBT
Capital Employed
Financing Activities
Facilitation service division
Unallocated Reconciling Items
Total
10
CD Equisearch Pvt Ltd
ities Distribution of Mutual Funds Dist
Q2FY15 Q2FY14 % chg. H1FY15 H1FY14
2260.36 2100.44 7.6 4409.95 4129.72
0.88 3.23 -72.8 1.10 3.44
Total Income 2261.24 2103.67 7.5 4411.05 4133.16
624.05 525.85 18.7 1257.09 1088.36
EBITDA (other income included) 1637.19 1577.82 3.8 3153.96 3044.80
1162.98 1059.02 9.8 2215.74 1995.85
11.45 8.09 41.5 22.88 15.01
PBT 462.76 510.71 -9.4 915.34 1033.94
152.72 158.78 -3.8 292.40 315.74
Net Profit 310.04 351.93 -11.9 622.94 718.20
Minority Interest 0.00 0.00 0.0 0.00 0.00
Profit 0.00 0.00 - 0.00 0.00
Net Profit after MI 310.04 351.93 -11.9 622.94 718.20
Extraordinary Item 0.00 0.00 0.0 0.00 0.00
Adjusted Net Profit 310.04 351.93 -11.9 622.94 718.20
EPS (F.V. 10) 13.66 15.51 -11.90 27.45 31.65
Q2FY15 Q2FY14 % chg. H1FY15 H1FY14
2247.16 2087.46 7.7 4382.68 4100.97
14.08 16.21 -13.1 28.37 32.19
Total Income 2261.24 2103.67 7.5 4411.05 4133.16
463.28 509.22 -9.0 916.25 1033
-0.5 1.51 -133.1 -0.84 0.97
0.02 0.02 0.0 0.07 0.03
Total PBT 462.76 510.71 -9.4 915.34 1033.94
8768.43 7730.81 13.4 8768.43 7730.81
31.86 29.88 6.6 31.86 29.88
284.97 251.65 13.2 284.97 251.65
Total 9085.26 8012.34 13.4 9085.26 8012.34
10
CD Equisearch Pvt Ltd
istribution of Life Insurance
H1FY14 % chg.
4129.72 6.8
3.44 -68.0
4133.16 6.7
1088.36 15.5
3044.80 3.6
1995.85 11.0
15.01 10.8
1033.94 -11.5
315.74 -7.4
718.20 -13.3
0.00 0.0
0.00 -
718.20 -13.3
0.00 0.0
718.20 -13.3
31.65 -13.3
H1FY14 % chg.
4100.97 6.9
32.19 -11.9
4133.16 6.7
1033 -11.3
0.97 -186.6
0.03 133.3
1033.94 -11.5
7730.81 13.4
29.88 6.6
251.65 13.2
8012.34 13.4
Figures In Rs crore
Figures In Rs crore
CD Equisearch Pvt Ltd
Equities Derivatives Commoditie
Consolidated Income Statement
Net Interest Income
Non Interest Income
Total Operating Income
Staff Costs
Operating Expenses
Pre-Provision Profits
Provision and contingency
Depreciation on Fixed Assets
Extraordinary gain/ (loss)
Provision for tax
Share in associate profit
Net Profit after MI
Extraordinary gain/(loss)
Adjusted Net Profit after MI
EPS (F.V.10)
11
CD Equisearch Pvt Ltd
ities Distribution of Mutual Funds Dist
FY12 FY13 FY14 FY15e
3442.92 3719.38 3751.54 4091.54
204.79 237.64 526.44 299.08
Total Operating Income 3647.71 3957.02 4277.98 4390.62
407.60 443.17 471.60 490.73
489.50 456.23 589.92 613.86
Provision Profits 2750.62 3057.62 3216.46 3286.03
775.73 872.24 1213.21 1262.43
PBDT 1974.89 2185.38 2003.25 2023.60
17.37 22.71 32.78 38.90
0.00 0.00 0.00 0.00
PBT 1957.51 2162.66 1970.46 1984.71
648.76 698.77 612.53 619.23
PAT 1308.75 1463.89 1357.94 1365.48
0.06 -0.46 0.00 0.00
Net Profit after MI 1308.81 1463.95 1357.94 1365.48
0.00 0.00 0.00 0.00
Adjusted Net Profit after MI 1308.81 1463.95 1357.94 1365.48
EPS (F.V.10) 57.86 64.52 59.85 60.18
Figures in
11
CD Equisearch Pvt Ltd
istribution of Life Insurance
FY15e FY16e
4091.54 4590.25
299.08 458.70
4390.62 5048.95
490.73 570.13
613.86 713.18
3286.03 3765.64
1262.43 1466.69
2023.60 2298.95
38.90 38.91
0.00 0.00
1984.71 2260.04
619.23 700.61
1365.48 1559.43
0.00 0.00
1365.48 1559.43
0.00 0.00
1365.48 1559.43
60.18 68.72
Figures in Rs crore
CD Equisearch Pvt Ltd
Equities Derivatives Commoditie
Consolidated Balance Sheet
SOURCES OF FUNDS
Share Capital
Reserves
Total Shareholder’s Funds
Long Term Borrowings
Total Liabilities
APPLICATION OF FUNDS
Fixed Assets
Tangible Asset
Intangible Asset
Intangible Assets Under Development
Long Term Loans and Advances
Non Current Investments
Current Assets, Loans & Advances
Inventory
Trade Receivables
Cash and Bank
Current Investments
Short term loans and advances
Other Current Assets
Total CA & LA
Current liabilities
Provisions
Total Current Liabilities
Net Current Assets
Net Deferred Tax
Other Assets (Net Of Liabilities)
Total Assets
12
CD Equisearch Pvt Ltd
ities Distribution of Mutual Funds Dist
FY12 FY13 FY14 FY15e
226.33 226.89 226.91 226.91
5806.32 7110.98 8283.27 9648.75
6032.65 7337.87 8510.18 9875.65
15160.25 20043.37 23962.08 28981.76
21192.91 27381.26 32472.27 38857.42
53.66 72.26 154.83 132.82
50.08 69.22 152.67 131.00
3.58 3.00 2.17 1.82
Intangible Assets Under Development 0.00 0.04 0.00 0.00
16528.65 21248.57 23769.64 31413.06
272.08 303.66 397.80 489.13
Current Assets, Loans & Advances
0.93 0.00 0.00 0.00
0.26 0.05 1.91 1.82
5321.81 6351.73 7118.44 8481.06
3394.17 2976.60 2037.46 1321.96
11064.14 15786.92 18412.32 22022.82
80.12 77.16 80.01 89.90
19861.43 25192.46 27650.13 31917.56
12354.76 17137.80 17257.43 22116.87
1652.15 1451.36 1604.61 1911.64
14006.91 18589.16 18862.03 24028.51
5854.52 6603.30 8788.10 7889.05
218.34 287.13 255.56 253.77
-1734.36 -1133.63 -893.67 -1320.42
21192.91 27381.26 32472.27 38857.42
Figures in
12
CD Equisearch Pvt Ltd
istribution of Life Insurance
FY15e FY16e
226.91 226.91
9648.75 11208.17
9875.65 11435.08
28981.76 31300.30
38857.42 42735.40
132.82 95.09
131.00 92.09
1.82 3.00
0.00 0.00
31413.06 34301.77
489.13 534.11
0.00 0.00
1.82 1.90
8481.06 9614.99
1321.96 1444.96
22022.82 23689.38
89.90 90.23
31917.56 34841.46
22116.87 23874.47
1911.64 2076.32
24028.51 25950.79
7889.05 8890.67
253.77 268.00
1320.42 -1354.26
38857.42 42735.40
Figures in Rs crore
CD Equisearch Pvt Ltd
Equities Derivatives Commoditie
Key Financial Ratios
Growth Ratios
Revenue (%)
Net Profit (%)
EPS (%)
AUM (%)
NII (%)
Margins
Operating Profit Margin (%)
Net Profit Margin (%)
Return
ROCE (%)
ROE (%)
ROA (%)
Valuations
Market Cap / Sales
EV/EBIDTA
P / E
P / BV
Other Ratios
Debt-Equity Ratio
Current Ratio
Interest Cover Ratio
Spread Analysis
NIM on AUM
Average Cost of Borrowings
Turnover Ratios
Fixed Asset Turnover
Total Asset Turnover
Asset Quality
Gross NPA*
Net NPA*
Provisions and Write offs (as % of AUM)
Capitalization & Efficiency Ratios
Capital Adequacy Ratio (%)
Tier I capital ratio (%)
Tier II capital ratio (%)
Cost to Income ratio (%)
Opex/AUM
13
CD Equisearch Pvt Ltd
ities Distribution of Mutual Funds Dist
FY12 FY13 FY14 FY15e
12.1 13.5 20.8 4.1
7.5 11.8 -7.2 0.6
7.5 11.5 -7.3 0.5
9.9 20.6 6.4 12.0
13.3 8.0 0.9 9.1
72.9 74.8 73.2 73.2
21.2 20.9 16.0 15.5
16.1 16.8 17.0 15.0
21.7 21.9 17.1 14.9
3.5 3.5 2.7 2.3
2.0 2.2 2.0 2.0
8.5 9.4 8.7 8.5
9.5 10.7 12.8 17.3
2.32 2.43 2.3 2.6
4.1 4.3 4.1 4.4
1.6 1.4 1.6 1.4
1.8 1.7 1.5 1.4
7.5 6.7 6.4 6.2
11.1 10.0 11.9 10.1
115.2 97.1 54.8 66.4
0.2 0.1 0.2 0.1
3.1 3.2 3.9 3.7
0.4 0.8 0.8 0.8
Provisions and Write offs (as % of AUM) 1.7 1.6 2.1 1.9
Capitalization & Efficiency Ratios
24.0 22.0 23.5 22.4
19.1 18.0 18.9 17.7
5.0 4.0 4.6 4.7
25.1 23.3 25.6 26.0
2.0 1.6 1.8 1.7
13
CD Equisearch Pvt Ltd
istribution of Life Insurance
FY15e FY16e
15.0
14.2
14.2
12.0 8.0
12.2
73.2 72.9
15.5 15.4
15.0 14.9
14.9 14.6
2.3
2.2
9.4
17.3 15.1
2.2
4.1
1.4
1.4
6.5
10.1 10.7
66.4 106.7
0.1
3.9
0.8
2.1
22.4 23.5
17.7 18.9
4.7
26.0 26.2
1.8
CD Equisearch Pvt Ltd
Equities Derivatives Commoditie
Outlook and Recommendation
The commercial vehicle industry is expected to be benefited by higher freight rates, diesel price cuts and pick
the industrial cycle. As commercial vehicles,
operations, key trends in this sector significantly impact volumes. Infrastructural investments in India have slowed
down in the last five years, affected by official bottlenecks and clearance issues asso
organizations. Financing problems also cast a shadow over this sector as banks, which had previously lent money
to stalled infrastructure projects, have become wary of financing fresh projects. Easing of government policies
speed-up in economic activity might provide an impetus to infrastructural investments in the long run.
The real GDP growth rate is projected to pick up to a range of 5% to 6% in 2014
bottlenecks and progress on the implementation of stalled projects already cleared should contribute to growth.
The company has historically maintained strong fundamentals in terms of core capital adequacy, asset quality,
average borrowing costs and asset quality. Asset Under Management crossed 50,000 crore on standalone basis and
58,000 crore on consolidated basis in FY 13
penetration strategy adopted by the management (rural demand has been consistent). However, where
urban areas are concerned, industrial production and mining activity has not picked up on a large scale
hence the commercial vehicle industry is still waiting for the revival which will fuel CV demand from urban areas.
We expect AUM (consolidated) to grow at a CAGR of atleast 11% between FY14 to FY16.
Shriram enjoys ‘AA+’ credit rating from CRISIL a
net interest income and net profit are expected to ramp up from the last quarter of FY15 onwards. RBI regulation
for 90-day recognition for recognition of NPA will lead to higher provisioning
lower securitization could cause some pressure on the net interest income. However, as maintenance of asset
quality is strongly correlated to the economic cycle, we expect NPAs to show a downtrend going forward.
The top management boasts of strong domain knowledge and vast experience. The company has a strong second
line management and the decision making is decentralized at various business levels which enable quick
disbursements and collection from the customer. Moreo
Shriram group, it enjoys strong group support from the group in terms of organizational culture and availability of
management resources.
Shriram Transport expect that with stable government in center
company’s strong business model, innovative fund management techniques,
support of the lending institutions to the Company’s fund mobilization activities on account of good tr
debt servicing, the company should achieve better
The stock currently trades at 17.3 times FY15e earnings and 15.1 times FY16e earnings and seems reasonably priced
at these levels, however, in the light of pick up
recommend ‘Accumulate’ with a target of Rs 1237 based on 18xFY16e earnings over a time horizon of 6
14
CD Equisearch Pvt Ltd
ities Distribution of Mutual Funds Dist
The commercial vehicle industry is expected to be benefited by higher freight rates, diesel price cuts and pick
As commercial vehicles, (especially M&HCVs), are deployed on a large scale for infrastructural
operations, key trends in this sector significantly impact volumes. Infrastructural investments in India have slowed
by official bottlenecks and clearance issues assoc
problems also cast a shadow over this sector as banks, which had previously lent money
to stalled infrastructure projects, have become wary of financing fresh projects. Easing of government policies
up in economic activity might provide an impetus to infrastructural investments in the long run.
The real GDP growth rate is projected to pick up to a range of 5% to 6% in 2014-15. Easing of domestic supply
bottlenecks and progress on the implementation of stalled projects already cleared should contribute to growth.
ntained strong fundamentals in terms of core capital adequacy, asset quality,
average borrowing costs and asset quality. Asset Under Management crossed 50,000 crore on standalone basis and
58,000 crore on consolidated basis in FY 13-14, is further expected to grow at a rapid pace in view of the rural
penetration strategy adopted by the management (rural demand has been consistent). However, where
urban areas are concerned, industrial production and mining activity has not picked up on a large scale
hence the commercial vehicle industry is still waiting for the revival which will fuel CV demand from urban areas.
We expect AUM (consolidated) to grow at a CAGR of atleast 11% between FY14 to FY16.
Shriram enjoys ‘AA+’ credit rating from CRISIL and most of its borrowings come from banks and institutions. The
net interest income and net profit are expected to ramp up from the last quarter of FY15 onwards. RBI regulation
day recognition for recognition of NPA will lead to higher provisioning by the company. This, coupled with
lower securitization could cause some pressure on the net interest income. However, as maintenance of asset
quality is strongly correlated to the economic cycle, we expect NPAs to show a downtrend going forward.
management boasts of strong domain knowledge and vast experience. The company has a strong second
line management and the decision making is decentralized at various business levels which enable quick
disbursements and collection from the customer. Moreover, since the company functions under the umbrella of
Shriram group, it enjoys strong group support from the group in terms of organizational culture and availability of
expect that with stable government in center, estimates of better GDP growth rate, the
ompany’s strong business model, innovative fund management techniques, continued confidence of investors and
support of the lending institutions to the Company’s fund mobilization activities on account of good tr
ompany should achieve better performance going forward.
The stock currently trades at 17.3 times FY15e earnings and 15.1 times FY16e earnings and seems reasonably priced
at these levels, however, in the light of pick up in credit demand from last quarter of FY15 onwards , we
recommend ‘Accumulate’ with a target of Rs 1237 based on 18xFY16e earnings over a time horizon of 6
14
CD Equisearch Pvt Ltd
istribution of Life Insurance
The commercial vehicle industry is expected to be benefited by higher freight rates, diesel price cuts and pick-up in
e deployed on a large scale for infrastructural
operations, key trends in this sector significantly impact volumes. Infrastructural investments in India have slowed
ciated with governmental
problems also cast a shadow over this sector as banks, which had previously lent money
to stalled infrastructure projects, have become wary of financing fresh projects. Easing of government policies and
up in economic activity might provide an impetus to infrastructural investments in the long run.
15. Easing of domestic supply
bottlenecks and progress on the implementation of stalled projects already cleared should contribute to growth.
ntained strong fundamentals in terms of core capital adequacy, asset quality,
average borrowing costs and asset quality. Asset Under Management crossed 50,000 crore on standalone basis and
d to grow at a rapid pace in view of the rural
penetration strategy adopted by the management (rural demand has been consistent). However, where-as the
urban areas are concerned, industrial production and mining activity has not picked up on a large scale yet and
hence the commercial vehicle industry is still waiting for the revival which will fuel CV demand from urban areas.
nd most of its borrowings come from banks and institutions. The
net interest income and net profit are expected to ramp up from the last quarter of FY15 onwards. RBI regulation
by the company. This, coupled with
lower securitization could cause some pressure on the net interest income. However, as maintenance of asset
quality is strongly correlated to the economic cycle, we expect NPAs to show a downtrend going forward.
management boasts of strong domain knowledge and vast experience. The company has a strong second
line management and the decision making is decentralized at various business levels which enable quick
ver, since the company functions under the umbrella of
Shriram group, it enjoys strong group support from the group in terms of organizational culture and availability of
of better GDP growth rate, the
continued confidence of investors and
support of the lending institutions to the Company’s fund mobilization activities on account of good track record of
The stock currently trades at 17.3 times FY15e earnings and 15.1 times FY16e earnings and seems reasonably priced
in credit demand from last quarter of FY15 onwards , we
recommend ‘Accumulate’ with a target of Rs 1237 based on 18xFY16e earnings over a time horizon of 6-12 months.
CD Equisearch Pvt Ltd
Equities Derivatives Commoditie
Disclaimer
This document is meant for our clients only and is not for public distribution. This material is for the personal information
authorized recipient, and we are not soliciting any action based upon it. This report is not to be construed as
solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. The ma
upon information that we consider reliable, but we do not represent that it is accurate or
such. Neither CD Equisearch Pvt. Ltd., nor any person connected with it, accepts any liability arising from the use of this d
The recipient of this material should rely on their own investigations and
current opinions as of the date appearing on this material only. While we endeavor to update on a reasonable basis the inform
discussed in this material, there may be regulatory, complianc
and others are cautioned that any forward-looking statements are not predictions and may be subject to change without notice. If you
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ities Distribution of Mutual Funds Dist
This document is meant for our clients only and is not for public distribution. This material is for the personal information
authorized recipient, and we are not soliciting any action based upon it. This report is not to be construed as
solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. The ma
upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon as
such. Neither CD Equisearch Pvt. Ltd., nor any person connected with it, accepts any liability arising from the use of this d
The recipient of this material should rely on their own investigations and take their own professional advice. Opinions expressed are our
current opinions as of the date appearing on this material only. While we endeavor to update on a reasonable basis the inform
discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. Prospective investors
looking statements are not predictions and may be subject to change without notice. If you
touch with CD Equisearch Pvt. Ltd.
CD Equisearch Pvt. Ltd. 10, Vaswani Mansion, 2nd Floor, Dinshaw Wachha Road, Churchgate Mumbai
2283 0652 / 0653, Fax +91 (22) 2283 2276, Email: [email protected],Website: www.cdequi.com.
15
CD Equisearch Pvt Ltd
istribution of Life Insurance
This document is meant for our clients only and is not for public distribution. This material is for the personal information of the
authorized recipient, and we are not soliciting any action based upon it. This report is not to be construed as an offer to sell or the
solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. The material is based
complete, and it should not be relied upon as
such. Neither CD Equisearch Pvt. Ltd., nor any person connected with it, accepts any liability arising from the use of this document.
take their own professional advice. Opinions expressed are our
current opinions as of the date appearing on this material only. While we endeavor to update on a reasonable basis the information
e, or other reasons that prevent us from doing so. Prospective investors
looking statements are not predictions and may be subject to change without notice. If you
CD Equisearch Pvt. Ltd. 10, Vaswani Mansion, 2nd Floor, Dinshaw Wachha Road, Churchgate Mumbai – 400 020. Phone: +91(22)