1
Please refer to important disclosures at the end of this report
1
1
Particulars (` cr)
Q3FY20
Q2FY19
% chg (qoq)
Q3FY19
% chg (yoy)
NII
2,055
2,037
0.9
2,027
1.4
Pre. Prov. Profit
1,630
1,588
2.7
1,620
0.6
PAT
879
765
14.9
635
38.3
Source: Company, Angel Research
For Q3FY2020, STFC has reported a good set of numbers. For the quarter, PAT
increased 38% yoy led by lower credit cost, AUM growth continued to be
moderate at 5% yoy vs. 3.6% in Q2FY2020 and 14% in Q2FY2019.
Disbursement increased 19% yoy driven by used (20% yoy) and new (17% yoy).
AUM growth moderated; NIM declined: During the quarter, STFC reported AUM
growth of 5% yoy, led by working capital (33% yoy on low base) and used vehicle
loans (8% yoy), while AUM of new vehicles and business loans declined 13% yoy.
NIM declined by 30bps/5bps yoy/qoq owing to higher liquidity maintained on
balance sheet around `7,800cr. Management sounded confident to improve NIM
hereon as re-pricing of the existing loans and new borrowing is happening at a
lower rate.
Asset quality moderately improved, credit costs lowered; guidance maintained at
2%: On absolute term, Gross stage 3 sequentially remained flat and Gross stage
3 ratio declined 9bps to 8.71% of AUM. Asset improvement was largely owing to
normalization of Q2FY2020 rains/floods impact, subsequently, Gross stage 2
also improved. During the quarter, credit cost tapered down to 1.63% vs. 2.44%
in Q2FY2020, however, Management has guided that credit costs for next year
would be at 2%. We expect Gross stage 3 to improve gradually owing to (a) good
monsoon to improve borrower's financials, (b) with implementation of BS VI and
likely implementation of scrappage policy collateral value of the used vehicle will
stabilize/improve and consequently LGD would decline.
Outlook & Valuation: We expect STFC’s AUM to grow at moderate CAGR of 11%
over FY2019-22E, however, we expect operating parameter to improve at healthy
rate owing to improvement in NIM, asset quality. We expect STFC to report
RoA/RoE of 2.8%/17.3% in FY2021E. At CMP, the stock is trading at 1.6x
FY2021E ABV and 8x FY2021E EPS, which we believe is reasonable for a
differentiated business model with return ratios. We recommend a BUY on the
stock with a Target Price of `1,410.
Key Financials
Y/E March (` cr)
FY17
FY18
FY19
FY20E
FY21E
NII
5,561
6,800
7,808
8,305
9,307
YoY Growth (%)
10.1
22.3
14.8
6.4
12.1
PAT
1,257
2,460
2,562
2,922
3,449
YoY Growth (%)
6.7
95.7
4.2
14.0
18.0
EPS
55
108
113
129
152
Adj Book Value
367
459
563
655
778
P/E
22.0
11.3
10.8
9.5
8.0
P/Adj.BV
3.3
2.7
2.2
1.9
1.6
ROE (%)
11.7
19.8
17.4
17.1
17.3
ROA (%)
1.8
2.9
2.5
2.6
2.8
Valuation done on closing price of 11/02/2020
BUY
CMP 1,220
Target Price 1,410
Investment Period 12 Months
Stock Info
Sector
Bloomberg Code
Shareholding Pattern (%)
Promoters 26.3
MF / Banks / Indian Fls 3.1
FII / NRIs / OCBs 64.3
Indian Public / Others 6.4
Abs.(%) 3m 1yr 3yr
Sensex 2.2 13.2 45.5
SHTF 8.7 15.6 26.2
Beta
1.6
NBFC
Market Cap (` cr)
27,662
52 Week High / Low
1297/909
Avg. Daily Volume
81,808
Face Value (`)
10
BSE Sensex
41,216
Nifty
12,108
Reuters Code
SRTR.BO
SHTF IN
3 Year Price Chart
Source: Company
Jaikishan J Parmar
Research Analyst
022 39357600, Extn: 6810
jaikishan.parmar@angelbroking.com
500
700
900
1,100
1,300
1,500
1,700
Feb-17
Jun-17
Oct-17
Feb-18
Jun-18
Oct-18
Feb-19
Jun-19
Oct-19
Shriram Transport Fin Co
Performance Highlights
Quarterly results | NBFC
Feb 12, 2020
2
Quarterly results | Q3FY2020 Result Update
Feb 12, 2020
2
Exhibit 1: Income Statement
Particular (` cr)
2QFY19
3QFY19
4QFY19
Q1FY20
Q2FY20
Q3FY20
% QoQ
% YoY
Total Interest Income
3,917
3,968
3,845
4,001
4,113
4,133
0
4
Interest Expenses
1,862
1,941
1,939
2,040
2,076
2,078
0
7
Net Interest Income (NII)
2,055
2,027
1,906
1,962
2,037
2,055
1
1
Other Income
24
26
35
27
43
87
100
233
Total Income
3,942
3,994
3,880
4,029
4,156
4,220
2
6
Net Income
2,080
2,053
1,941
1,989
2,080
2,142
3
4
Operating Expenses
458
433
429
446
493
512
4
18
Employee Expenses
232
222
204
233
251
255
2
15
Other Operating Expenses
226
211
225
213
242
257
6
22
Operating Profit
1,622
1,620
1,512
1,543
1,588
1,630
3
1
Provisions
684
636
540
561
661
444
(33)
(30)
PBT
938
984
972
982
927
1,186
28
21
Provisions for Tax
329
348
226
347
162
308
90
(12)
Tax Rate %
35.1
35.4
23.3
35.4
17.5
25.9
49
(27)
PAT
609
635
746
634.2
765.1
878.8
15
38
Source: Company, Angel Research
Exhibit 2: Quarterly performance
AUM Mix (%)
2QFY19
3QFY19
4QFY19
Q1FY20
Q2FY20
Q3FY20
% QoQ
% YoY
New CV Loans
13
12
12
11.4
10.7
10.2
(58.1)bp
(214.6)bp
Used CV loans
87
88
88
88.6
89.3
89.8
58.1bp
214.6bp
Profitability
Cal NIM
8.02
7.79
7.32
7.44
7.60
7.58
(2.2)bp
(21.3)bp
NIM
7.44
7.44
7.16
7.16
7.19
7.14
(5)bp
(30)bp
C/I
22.0
21.1
22.1
22.4
23.7
23.9
21.6bp
281.4bp
ROE
17.0
17.2
19.4
15.8
18.4
20.2
181.8bp
304.3bp
Calc -Yield - AUM
15.29
15.25
14.77
15.18
15.34
15.23
(10.9)bp
(1.5)bp
Calc -Yield - Advance
18.40
18.42
18.13
18.86
19.42
19.40
(2.2)bp
97.8bp
Calc - COF
8.59
8.74
8.74
9.14
9.17
9.13
(4)bp
38.9bp
Spread
9.8
9.7
9.4
9.7
10.3
10.3
1.8bp
58.9bp
Exhibit 3: Break Up
Particular (` cr)
2QFY19
3QFY19
4QFY19
Q1FY20
Q2FY20
Q3FY20
% QoQ
% YoY
New
12,719
12,077
11,594
11,450
10,967
10,465
(5)
(13)
Used
86,057
86,126
87,050
89,021
91,215
92,626
2
8
Business Loan
3,314
3,182
2,971
2,912
2,852
2,649
(7)
(17)
Working Capital
2,171
2,365
2,807
2,898
3,027
3,142
4
33
Others
119
68
60
62
60
49
(18)
(28)
Total AUM
1,04,380
1,03,818
1,04,482
1,06,343
1,08,120
1,08,931
1
5
Source: Company, Angel Research
3
Quarterly results | Q3FY2020 Result Update
Feb 12, 2020
3
Exhibit 4: Asset Quality & Business Details
Asset Quality
2QFY19
3QFY19
4QFY19
Q1FY20
Q2FY20
Q3FY20
% QoQ
% YoY
Credit Cost (Annualized) AUM
2.6
2.5
2.1
2.1
2.4
1.6
(33)
(34)
GS 3
9,092
9,033
8,623
8,926
9,397
9,392
(0)
4
GS 3 %
8.71
8.70
8.25
8.52
8.80
8.71
(9)bp
1bp
ECL prov stage 3
3,113
3,187
2,967
2,841
3,017
3,018
0
(5)
Net Stage 3
5,979
5,846
5,656
6,085
6,380
6,375
(0)
9
Coverage Ratio Satge 3
34
35
34
32
32.1
32.1
2.5bp
(315.2)bp
GS 1& 2
96,173
93,875
94,358
95,889
97,406
98,385
1
5
ECL prov stage 1& 2
2,604
2,651
2,604
2,762
2,766
2,679
(3)
1
Net Stage 1 & 2
93,568
91,224
91,755
93,127
94,639
95,706
1
5
ECL Prov (%) Stage 1&2
2.71
2.82
2.76
2.88
2.84
2.72
(12)bp
(10)bp
Business Details (`)
AUM
1,04,380
1,03,818
1,04,482
1,06,343
1,08,120
1,08,931
1
4.93
Disbursement
13,799
9,550
11,959
12,300
13,120
11,607
(12)
22
New
2,300
400
8,100
890
666
476
(29)
19
Old
11,510
9,020
11,020
11,260
12,282
10,807
(12)
20
On book Loans
87,815
84,533
85,085
84,661
84,772
85,678
1
1
Off book (Securitization)
16,565
19,285
17,223
19,750
21,691
21,805
1
13
DA
24
1,721
2,175
1,942
1,657
1,448
(13)
(16)
Source: Company, Angel Research
Outlook & Valuation: We expect STFC’s AUM to grow at moderate CAGR of
11% over FY2019-22E, however, we expect operating parameter to improve
at healthy rate owing to improvement in NIM, asset quality. We expect STFC to
report RoA/RoE of 2.8%/17.3% in FY2021E. At CMP, the stock is trading at
1.6x FY2021E ABV and 8x FY2021E EPS, which we believe is reasonable for a
differentiated business model with return ratios. We recommend a BUY on the
stock with a Target Price of `1,410.
4
Quarterly results | Q3FY2020 Result Update
Feb 12, 2020
4
Income Statement
Y/E March ( `cr)
FY17
FY18
FY19
FY20E
FY21E
NII
5,561
6,800
7,808
8,305
9,307
- YoY Growth (%)
10.1
22.3
14.8
6.4
12.1
Other Income
82
215
101
110
122
- YoY Growth (%)
-55.5
162.8
-53.0
8.9
10.6
Operating Income
5,643
7,015
7,909
8,415
9,429
- YoY Growth (%)
7.8
24.3
12.7
6.4
12.1
Operating Expenses
1,275
1,492
1,750
2,028
2,252
- YoY Growth (%)
-5.4
17.0
17.3
15.9
11.0
Pre - Provision Profit
4,368
5,524
6,159
6,387
7,177
- YoY Growth (%)
12.3
26.4
11.5
3.7
12.4
Prov. & Cont.
2,444
1,722
2,382
2,430
2,568
- YoY Growth (%)
16.0
-29.5
38.3
2.0
5.7
Profit Before Tax
1,924
3,801
3,776
3,957
4,610
- YoY Growth (%)
8.0
97.6
-0.7
4.8
16.5
Prov. for Taxation
667
1,341
1,214
1,035
1,160
- as a % of PBT
34.6
35.3
32.1
26.2
25.2
PAT
1,257
2,460
2,562
2,922
3,449
- YoY Growth (%)
6.7
95.7
4.2
14.0
18.0
Balance Sheet
Y/E March ( ` cr)
FY17
FY18
FY19
FY20E
FY21E
Share Capital
227
227
227
227
227
Reserve & Surplus
11,075
13,349
15,609
18,196
21,248
Net worth
11,302
13,576
15,836
18,422
21,475
Borrowing
53,110
82,131
87,968
95,885
1,06,432
- YoY Growth (%)
6.7
54.6
7.1
9.0
11.0
Other Liab. & Prov.
9,998
1,539
1,487
1,291
1,024
Total Liabilities
74,410
97,245
1,05,291
1,15,598
1,28,932
Investment
1,549
2,341
3,999
3,999
3,999
Cash
4,441
3,675
3,981
4,571
5,077
Advance
65,463
90,738
96,751
1,06,426
1,19,197
- YoY Growth (%)
5.8
38.6
6.6
10.0
12.0
Fixed Asset
84
120
147
154
162
Other Assets
2,874
383
413
448
497
Total Asset
74,410
97,257
1,05,291
1,15,598
1,28,932
Growth (%)
9.5
30.7
8.3
9.8
11.5
5
Quarterly results | Q3FY2020 Result Update
Feb 12, 2020
5
Key Ratio
Y/E March
FY17
FY18
FY19
FY20E
FY21E
Profitability ratios (%)
NIMs
8.5
8.5
8.1
7.9
8.0
Cost to Income Ratio
22.6
21.3
22.1
24.1
23.9
RoA
1.8
2.9
2.5
2.6
2.8
RoE
11.7
19.8
17.4
17.1
17.3
Asset Quality (%)
Gross NPAs
8.20
9.15
8.3
8.0
7.5
GNPA (` Cr)
5,408
7,376
7,100
8,514
8,940
Net NPAs (%)
2.7
2.83
2.6
2.4
2.4
NPA (` Cr)
1,659
2,131
2,055
2,554
2,861
Provision Coverage
67.1
69.1
69.2
70.0
68.0
Credit Cost (AUM)
3.1
1.8
2.3
2.0
1.9
Per Share Data (`)
EPS
55
108
113
129
152
ABVPS
367
459
563
655
778
DPS
10
11
13
15
17
BVPS
498
598
698
812
947
Valuation Ratios
PER (x)
22.0
11.3
10.8
9.5
8.0
P/ABVPS (x)
3.3
2.7
2.2
1.9
1.6
P/BVPS
2.4
2.0
1.7
1.5
1.3
Dividend Yield
0.8
0.9
1.1
1.2
1.4
DuPont Analysis
FY17
FY18
FY19
FY20E
FY21E
NII
7.8
7.9
7.7
7.5
7.6
(-) Prov. Exp.
3.4
2.0
2.4
2.2
2.1
Adj. NII
4.4
5.9
5.4
5.3
5.5
Other Inc.
0.1
0.3
0.1
0.1
0.1
Op. Inc.
4.5
6.2
5.5
5.4
5.6
Opex
1.8
1.7
1.7
1.8
1.8
PBT
2.7
4.4
3.7
3.6
3.8
Taxes
0.9
1.6
1.2
0.9
0.9
RoA
1.8
2.9
2.5
2.6
2.8
Leverage
6.6
6.9
6.9
6.4
6.1
RoE
11.7
19.8
17.4
17.1
17.3
Valuation done on closing price of 11/02/2020
6
Quarterly results | Q3FY2020 Result Update
Feb 12, 2020
6
Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com
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Disclosure of Interest Statement Shriram Transport Fin
1. Financial interest of research analyst or Angel or his Associate or his relative No
2. Ownership of 1% or more of the stock by research analyst or Angel or associates or relatives No
3. Served as an officer, director or employee of the company covered under Research No
4. Broking relationship with company covered under Research No
Ratings (Based on Expected Returns: Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)
over 12 months investment period) Reduce (-5% to -15%) Sell (< -15%)
Hold (Fresh purchase not recommended)