This AA+ Rated Bluechip Finance Stock Can Gain 16%, Beneficiary Of CV Demand: Motilal Oswal

Target Price, Current Market Price

The Current Market Price (CMP) of Shriram Transport Finance is Rs. 1,252. Motilal Oswal has estimated a Target Price for the stock at Rs. 1,450. This stock has the potential to give a 16% return, in the upcoming 1 year. This is a large-cap company with a market capitalization of around Rs. 34,239 crore.

The company's net income in FY22 was recorded at Rs. 95.4 b, which is expected to be at Rs. 100.9 b in FY23. Their PAT in FY22 stood at Rs. 27.1 b, which is expected to be at Rs. 32.2 b in FY23. The company's NIM in FY22 was recorded at 7.9%, which is expected to be at 7.6% in FY23.

The company is also offering a 1.58% dividend yield to its shareholders.

 

Stock advantages: Motilal Oswal

Commenting about the stock, Motilal Oswal said, "Demand/volumes for Commercial Vehicles (CVs) have remained strong for the past three-to-four months. This demand momentum in CVs is likely to sustain and should aid SHTF, which is a predominant play on Used CV financing. SHTF has delivered historically high levels of disbursements over the last three quarters, aided by higher ticket sizes and greater volumes. Capacity utilization levels remain high. The management foresees a strong CV cycle over the next three years. It is making steady progress on the announced merger, with various cross-sell pilots being run across identified branches. We model an AUM/PAT CAGR of 11%/21% over FY22-24 for an FY24 RoA/RoE of 2.5%/13%."

Additionally, "Our estimates suggest that ~50% of the growth in FY22 was aided by higher ticket sizes and the balance was attributable to higher volumes. Commentaries from fleet operators and vehicle financiers seem to suggest that capacity utilization has been high at 80-85% all through Jan-May'22. We expect this to translate into disbursement/AUM CAGR of 8%/11% over FY22-24 for SHTF," the brokerage firm stated.

Company profile:

Shriram Transport Finance is India's largest and a trusted asset-based NBFC. With the wide availability of decentralized 1758 Branches and 831 rural centers across the country for personalized services. It operates with 27218 dedicated employees. Shriram Transport Finance Company has the highest safety Rated "[ICRA]AA+ (Stable)" by ICRA and Rated "IND AA+/Stable" by India Ratings and Research (Indicates a high degree of safety), as the company informs. Proven track record for more than 40 years of timely and on-track fixed deposit payment. The company has a well-diversified borrowing mix, with estimated fixed/floating rate liabilities of ~85%/~15%. The company has exhibited lower asset quality stress (particularly during the Covid-19 pandemic) relative to its peers. A large part of this outperformance is attributable to the Used CV segment (constituting over 90% of its AUM mix) and exposure to the SRTO customer segment,

Disclaimer

The above stock was picked from the brokerage report of Motilal Oswal. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.