11 June 2020
4QFY20 Results Update | Sector: Financials
Shriram Transport Finance
Estimate change
TP change
Rating change
Motilal Oswal values your support in
the Asiamoney Brokers Poll 2020 for
India Research, Sales and Trading
team. We
request your ballot.
CMP: INR638
TP: INR960 (+50%)
Buy
Moderate biz growth; COVID provisions mar profitability
SHTF’s 4QFY20 PAT declined 70% YoY to INR2.2b (65% miss). While
operating profit missed our estimates by 8% due to lower-than-expected
NII, higher COVID-19 related provisions of INR9.1b led to the PAT miss. PAT
declined 2% YoY in FY20 while RoA/RoE stood at 2.3%/15%.
The company collected money from 84%/23%/52% of its customers in
Mar/Apr/May’20 and in value terms it stood at ~15%/30% of Apr/May’20
collections. NIMs declined 38bp QoQ to 6.76% as the currency movement
on forex borrowings and higher excess liquidity impacted margins. GS3
remained stable YoY and declined 36bp QoQ to 8.36%
We downgrade our EPS estimates by 11% for FY21E on the back of lower
loan book growth. Our channel checks indicate that the used CV and driver-
cum-operator segments (which are SHTF’s target segments) are doing much
better than other segments in CV financing. We believe risk-reward at the
current level is favorable,
Buy with a TP of INR960 at 1x PBV FY22E.
AUM growth remains muted on back of lower disbursements
Disbursements declined ~9%/5% YoY/ QoQ to INR109b, led by 54%/22%
YoY/ QoQ decline in new vehicles and 6%/4% YoY/QoQ decline in used
vehicles at INR103b (95% of total disbursements).
AUM was flat QoQ and grew 5% YoY to INR1.1t. Continuing the trend of the
past 4-5 quarters, new-vehicle AUM declined 6%/16% QoQ/YoY to INR98b.
Used-vehicle AUM grew 1.4%/8% QoQ/YoY to INR940b and forms 86% of
AUM. Working capital loans grew 3% QoQ/YoY to INR60b.
Rural portfolio contributed 41% of AUM (v/s 40% in 3QFY20 and 37% in
4QFY19).
USD500m ECB raise; Margins under pressure; Liquidity sufficient
SHTF raised USD500m of foreign currency borrowings in 4QFY20;
its share
in total borrowings is now up from 6% in FY19 and 13% in 9MFY20 to 18%
in FY20.
NIMs declined 37bp QoQ to 6.8%, the lowest in several quarters.
SHTF had INR104b/INR57b liquidity as of Mar/May’20 on its balance sheet.
The company has applied for moratorium, which has been granted by
some banks. Expect moratorium of INR20b.
GS3 declined while PCR improved; INR90b COVID-19 provisions
GS3 ratio improved 35bp QoQ to 8.36% while PCR improved 250bp to 35%.
GS3 declined 2% QoQ to INR91.8b. The sequential decline was lower than
that witnessed in the earlier quarter due to the lockdown
Write offs of ~INR5b is in line with the trend that we have noticed so far.
The company made
INR9b vs INR90b
COVID-19 provisions (0.9% of AUM,
largely in line with peers). As a result, total ECL provisions increased 50bp
QoQ to 5.8%. Annualized credit costs stood at 4.1% for the quarter.
Management Commentary/Other highlights
In Apr/May’20, 15%/30% of customers (in value terms) paid instalments.
Top management took 10-20% pay cut while other employees have not
received salary hikes.
Management did not discuss capital raise in the board meeting. Tier 1
capital is up 130bp QoQ to 18.1%.
Expect urban market to improve from Sep’20 and rural market from Jun-
Jul’20. Seeing inquiries for used CVs in rural markets.
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
SHTF IN
227
144.7 / 1.9
1367 / 440
-20/-24/-26
2334
Financials & Valuations (INR b)
2020 2021E
Y/E March
83.1
75.7
Net Inc.
62.3
57.3
PPP
25.0
15.1
PAT
110
66
EPS (INR)
-2.4
-39.7
EPS Gr. (%)
794
854
BV/Sh (INR)
Ratios
8.0
7.3
NIM (%)
25.0
24.3
C/I ratio (%)
2.3
1.4
RoA (%)
14.9
8.1
RoE (%)
5.4
12.0
Payout (%)
Valuations
5.8
9.6
P/E (x)
0.8
0.7
P/BV (x)
0.8
1.0
Div. Yield (%)
2022E
82.1
62.0
26.8
118
77.8
960
7.9
24.5
2.4
13.0
12.0
5.4
0.7
1.9
Shareholding pattern (%)
As On
Mar-20 Dec-19 Mar-19
Promoter
26.3
26.3
26.1
DII
2.7
3.1
3.9
FII
64.7
64.3
50.9
Others
6.4
6.4
19.1
FII Includes depository receipts
Research Analyst: Alpesh Mehta
(Alpesh.Mehta@MotilalOswal.com);+91 22 6129 1526 |
Piran Engineer
(Piran.Engineer@MotilalOswal.com); +91 22 6129 1539
Nitin Aggarwal
(Nitin.Aggarwal@MotilalOswal.com); +91 22 6129 1542 |
Divya Maheshwari
(Divya.Maheshwari@motilaloswal.com); +91 22 6129 1540
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.