CD Equisearch P Pvt Ltd Jan 7, 2015 Shriram Transport Finance Company Ltd Ltd. 22.7 No. of shares (crore) Mkt cap (Rs crs) 24324 Current price (FV. 10) Price target (Rs) 1045 1237 52 week H/L (Rs.) Company Background Established in 1979, Shriram Transport Finance Company Ltd is India’s leading non banking financial company (NBFC) with strong competitive advantages in pre-owned owned commercial vehicle (CV) financing (especially 5-12 12 year old vehicles). 1224/549 Book Value (Rs.) 402 P/BV (FY15e/16e) 2.6/2.2 P/E (FY15e /16e) BSE Code 17.3/15.1 511218 Highlights • Strong competitive edge and track record in pre-owned pre CV financing (25% market share) is rooted in its strong customer relationships, expertise and experience in pre-owned pre 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 numb of necessary documents, this expertise experti gain significance. The company’s AUM has recorded strong 30% CAGR over the past decade while maintaining credit costs at manageable levels. Rural initiativess and newer products/business will drive growth. • The company is increasing in rural reach to capture capt the increase in penetration of CVs in rural areas driven by better road infrastructure and higher goods demand due to rising incomes, freight rates ates and falling diesel prices and interest rates. • We expect expansion of assets under management, and stabilizing izing return on equity and net interest income going forward. Regulatory norms with respect to non performing assets and securitization are to be monitored. • Thee stock currently trades at 17.3 times FY15e earnings and 15.1 times FY16e earnings and seems reasonably rea 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 6-12 months. SRTRANSFIN NSE Code Bloomberg Daily volume (avg. weekly) Shareholding pattern SHTF IN 212760 % 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 FY12 FY13 FY14 FY15e FY16e Net Interest Income 3442.92 3719.38 3751.54 4091.54 4590.25 Non Interest Income 204.79 237.64 526.44 299.08 458.70 Pre-Provision Profits 2750.62 3057.62 3216.46 3286.03 3765.64 PBDT 1974.89 2185.38 2003.25 2023.60 2298.95 Net Profit EPS (F.V.10) 1308.81 1463.95 1357.94 1365.48 1559.43 57.86 64.52 59.85 60.18 68.72 7.5 11.5 -7.3 0.5 14.2 EPS growth (%) Equities Derivatives Commoditie ities Distribution of Mutual Funds Dis istribution of Life Insurance CD Equisearch Pvt Ltd 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%) Source: Crisil , STFC Pre-owned owned Commercial Vehicle Industry Pre-owned owned commercial vehicles segment has been the flagship segment 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 12 year old pre-owned pre 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 prepre owned vehicle market is largely unorganized and under penetrated with 60-65% 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 finally goes on to local ocal uses like garbage trucks after 13-14 13 years. These changes of ownership create multiple financing options for financiers. Financial and Operational Dynamics of CV Industry Source: Crisil 2 Equities Derivatives Commoditie ities Distribution of Mutual Funds Dist istribution of Life Insurance 2 CD Equisearch Pvt Ltd Economic performance of the commercial vehicle industry (FY 2013-14) Segment-wise Volumes Segments FY10 FY11 FY12 FY13 FY14 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 Source: STFC GDP growth showed a sluggish growth in the year 20132013 14.The The uneven political climate led to stagnant economical scenario – thereby leading to lower lowe infusion of investments in infrastructure and core industries – also leading to lower capital expenditure enditure and less le job creation. The process forr new licenses was set into motion, with the 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 economic activity across key states. 2013-14 was among the most challenging year for thee Indian commercial vehicles sector. India’s cycle-prone cycle commercial vehicle industry is not new to downturns.. The medium and heavy truck segment - which accounts for the bulk of the industry’s load load-carrying capacity - shrank 26 per cent in 2012-13 2012 and shrank 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 14 grew marginally by 3.53% as compared to year 2012-13 2012 (last year). The sales of passenger senger vehicles declined by 6.05%. Medium & Heavy Commercial Vehicles (M&HCVs) registered negative growth th of 25.33% and Light Commercia Commerciall Vehicles also dropped by 17.62%. Three Wheelers sales declined by 10.90%. Passenger Carriers and Goods Carriers decline declined 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 idle time due to degrowth growth in manufacturing, mining and quarrying sectors, pressure on margins as the freight eight rate increases were not commensurate with fuel price increases. This resulted into lower demand for credit from urban areas. The rural and semi semi-urban urban credit demand was maintained due to impressive growth in food grain production. The real GDP growth rate is projected to pick up to a range of 5% to 6% in 2014 2014-15. 15. Easing of domestic supply bottlenecks and progress on the implementation of stalled projects already cleared should contribute to growth. 3 Equities Derivatives Commoditie ities Distribution of Mutual Funds Dist istribution of Life Insurance 3 CD Equisearch Pvt Ltd 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 is a leader in organized ed financing of pre-owned pre trucks with a market share of 20-25% 25% in the strategic segment of 55-12 year old trucks. Having a pan-India pan presence with a network of 654 branches and partnership with over 500 private financiers, the company has revitalized the prepre owned commercial vehicle cle industry and thereby ensured inclusive growth to its st strong rong customer base of over 6 lakh first time users and driver-turned-owners. 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 - Shriram Equipment Finance Co. Ltd. It offers a wide range of pre-owned owned and new commercial construction eequipment quipment including forklifts, cranes, loaders etc. to first time users, including the existing customers. During 2013 2013-14, 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. 3,418.39 3 crore as on March 31, 2014. Auto malls Shriram Automall India Limited, a subsidiary of the company, operates 32 Automalls, 11 of which were opened during 2013-14. Automall is the first-of-its its-kind 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 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. Nearly 30% of Shriram Transport’s disbursements (by volume) are from customers who have bought vehicles through automalls. Investment Rationale Pioneer in pre-owned owned commercial vehicle financing sector Shriram Transport’s leadership position in pre-owned pre 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 operators (SRTOs) and first time u users sers (FTUs) , who have low credit profile and may not have a numbe numberr 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 inco 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 Equities Derivatives Commoditie ities Distribution of Mutual Funds Dist istribution of Life Insurance 4 CD Equisearch Pvt Ltd Fundamentally Strong Financials AUM AUM(off BS) 2016e 80000 Rs crs 2015e 60000 2014 40000 2013 NII 2012 20000 2011 0 2010 Rs crs Source : CD Research 0 2000 4000 6000 Source : CD Research Rs Crs 1600 1400 1200 1000 800 600 400 200 0 Prov/write off % NII/AUM 8.0 Prov/AUM 6.0 4.0 2.0 0.0 2010 2011 2012 2013 2014 2015e 2016e Assets under management on strong growth track Consolidated assets under management (AUM) increased from Rs 55,250 crore in FY 2013-14 2013 to Rs 58,800 crore in FY 2014-15. 15. The AUM consists of financing of medium and light commercial vehicles (MLCVs-29%), (MLCVs passenger vehicles (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 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 14 led to slowdown in the industr industrial ial and mining activity, which is responsible for generating 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 2013-14 2013 , which going forward 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 ome , 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 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 forwar forward d profitability may be impacted due to higher provisioning. 5 Equities Derivatives Commoditie ities Distribution of Mutual Funds Dist istribution of Life Insurance 5 CD Equisearch Pvt Ltd OPM (%) 5 Gross NPA* NPM(%) 80.0 Net NPA* 4 60.0 3 40.0 2 20.0 1 0.0 0 2010 2011 2012 2013 2014 2015e 2016e 2010 % 2011 2012 2013 2014 2015e 2016e Source: CD Research Source : CD Research 12000 10000 8000 6000 4000 2000 0 Rs Crs 2016e 2015e 2014 2013 2012 2011 2010 Revenue Net Profit Rs Crs 2010 2011 2012 2013 2014 2015e 2016e Profit 0 2000 4000 6000 EBIT 8000 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 ed asset assetss portfolio stood at Rs. 16,543 crore as on March 31, 2014, 2014 which accounts for 28% of the total AUM (decrease from 35% in FY13) FY13). The steps initiated by the company to ensure superior asset quality through transparent and impactful processes have resulted iin n expanding its realm of economical financial alternative. The securitization allows the company to mitigate the interest risk by converting its floating liability to fixed price liability FY14 but also enables the company to access low cost funds under FY13 priority sector by RBI. However, due to the RBI guidelines we expect the share of securitization to decrease further going FY12 forward which will increase the costt of borrowing, and stress FY11 net interest income. FY10 Other borrowing instruments include term loans, fixed deposits and subordinated debts. FY09 0% Source : CD Research Equities 50% Retail Securitisation Other Institutions Derivatives 100% Commoditie ities The company enjoys ‘AA+’ credit rating from CARE and ‘AA/AA+’ from CRISIL. 6 Distribution of Mutual Funds Dist istribution of Life Insurance 6 CD Equisearch Pvt Ltd Capital Adequacy Ratio (%) 25.0 20.0 Tier 1 capital ratio(%) 15.0 10.0 Tier 2 capital ratio(%) 5.0 0.0 2012 Source: STFC 12.0 2013 2014 P/E P / BV 2015e 2016e Source: CD Research 10.0 20.0 8.0 6.0 4.0 Market Cap / Sales 15.0 EV/EBIDTA 10.0 2.0 5.0 0.0 0.0 2011 2012 2013 2014 2015e 2016e 2011 2012 2013 2014 2015e 2016e Capital Adequacy Source: CD Research The company’s capital adequacy ratio in 2013-14 2013 was 23.5 percent. It has followed the trend 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 range of 17.7%-18.9% 18.9% and Tier 2 capital of about 4%. 2016e 2014 2012 Valuations and Profitability EPS 2010 0 20 40 60 80 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 52% in FY16). The pre-provision 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 iin n FY12) within next two years, However as the economy is set to witness an upturn, which it will bring stability in returns. We expect ROCE as well as ROE in FY15 and FY16 to be around 15% , 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 tthe most fairly valued. 7 Equities Derivatives Commoditie ities Distribution of Mutual Funds Dist istribution of Life Insurance 7 CD Equisearch Pvt Ltd Knowledge driven and relationship driven business model m Shriram Transport has developed strong relationships and customer base within the truck community, the company pany operates on a relationship-based relationship model. Each product executive is assigned 100 100-150 customers mers. He/she takes care of credit assessment, collection collectionss and caters to all the financing needs of truck operators perators such as tyre financing financing,, credit cards for diesel and bills discounting which not only generates additional business for Shriram Transport but also helps keep a check on overall levera leverage ge to the borrower. borro Further, he/she handholds the customers in times of distress and allows them to carry out part payment of EMI in case of shortfall of cash flows 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 itt in managing asset quality. Such business model is aalso prone to scalability issues; however Shriram Transport has been able to manage the same. Shriram has entered into partnerships and co co-financing financing arrangement with over 500 private financiers. Under this 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 los losses, es, if any, are shared between the company and the partner in same proportion. on. 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 llike tractors,, small CVs, passenger vehicles 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 products to grow at a faster pace. Tractor financing is expected to 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 ort 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 iin n new CV financing (in which the th company has shown substantial degrowth growth as per Q2FY15 rresults) 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 while w the company has managed its risks well, it has in the past been affected by sector-specific specific issues such as ban on mining activity in southern states. 8 Equities Derivatives Commoditie ities Distribution of Mutual Funds Dist istribution of Life Insurance 8 CD Equisearch Pvt Ltd 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 Sales Profit OPM Mcap/ sales NPM Int cov P/BV P/E Shriram Trans. 227 1045 23712 8758 1262.7 72.1 2.7 14.4 2.2 13.8 1.4 2.6 18.7 M&M Financial 114 322 18371 5698 907.7 69.3 3.2 15.9 2.5 16.0 1.6 3.2 20.2 Sundaram Finance* 111 1278 13978 2341 456.3 82.0 6.0 19.5 2.9 17.2 1.6 5.3 30.6 Cholamandalam Inv 644 486 31248 3503 380.2 71.2 8.9 10.9 1.6 12.7 1.3 10.5 82.2 Magma Fincorp 38 107 2019 1943 161.8 58.7 1.0 8.3 1.1 9.4 0.9 1.2 12.5 ROA ROE *standalone, Mcap, sales, profit, equity in Rs crore Source: CD Research 10000 Magma Fincorp 8000 Cholamandalam Inv 6000 Sundaram Finance* 4000 M&M Financial… P/BV Mk cap/ sales Profit 2000 Shriram Transport… 0 Rs Crs 0.0 Sales 5.0 10.0 OPM Magma Fincorp Cholamandalam Inv 15.0 Shriram Transport Fin. M&M Financial Services Sundaram Finance* Cholamandalam Inv Magma Fincorp The matrix displayss financials and valuations of the major asset financing companies. Shriram Transport Finance concentrates on financing commercial vehicles only, whereas, as, other mentioned NBFCs finance many other products like car loans, housing finance, gold loans personal finance etc. Sundaram Finance* M&M Financial Services Shriram Transport Fin. % 0.0 20.0 40.0 60.0 80.0100.0 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 12 year segment with slight competition from private financiers. The yields are minimum in the 0-5 5 year segment where the dominant players apart from m the mentioned NBFCs are HDFC Bank, IndusInd Bank and ICICI Bank. 9 Equities Derivatives Commoditie ities Distribution of Mutual Funds Dist istribution of Life Insurance 9 CD Equisearch Pvt Ltd 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) Figures In Rs crore Q2FY15 2260.36 0.88 2261.24 624.05 1637.19 1162.98 11.45 462.76 152.72 310.04 0.00 0.00 310.04 0.00 310.04 13.66 Q2FY14 2100.44 3.23 2103.67 525.85 1577.82 1059.02 8.09 510.71 158.78 351.93 0.00 0.00 351.93 0.00 351.93 15.51 % chg. 7.6 -72.8 7.5 18.7 3.8 9.8 41.5 -9.4 -3.8 -11.9 0.0 -11.9 0.0 -11.9 -11.90 H1FY15 4409.95 1.10 4411.05 1257.09 3153.96 2215.74 22.88 915.34 292.40 622.94 0.00 0.00 622.94 0.00 622.94 27.45 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 H1FY14 4129.72 3.44 4133.16 1088.36 3044.80 1995.85 15.01 1033.94 315.74 718.20 0.00 0.00 718.20 0.00 718.20 31.65 % chg. 6.8 -68.0 6.7 15.5 3.6 11.0 10.8 -11.5 -7.4 -13.3 0.0 -13.3 0.0 -13.3 -13.3 Figures In Rs crore Q2FY15 Q2FY14 % chg. H1FY15 H1FY14 % chg. 2247.16 14.08 2261.24 2087.46 16.21 2103.67 7.7 -13.1 7.5 4382.68 28.37 4411.05 4100.97 32.19 4133.16 6.9 -11.9 6.7 463.28 -0.5 509.22 1.51 -9.0 -133.1 916.25 -0.84 1033 0.97 -11.3 -186.6 0.02 462.76 0.02 510.71 0.0 -9.4 0.07 915.34 0.03 1033.94 133.3 -11.5 8768.43 31.86 284.97 9085.26 7730.81 29.88 251.65 8012.34 13.4 6.6 13.2 13.4 8768.43 31.86 284.97 9085.26 7730.81 29.88 251.65 8012.34 13.4 6.6 13.2 13.4 10 Equities Derivatives Commoditie ities Distribution of Mutual Funds Dist istribution of Life Insurance 10 CD Equisearch Pvt Ltd Figures in Rs crore Consolidated Income Statement Net Interest Income Non Interest Income Total Operating Income Staff Costs Operating Expenses Provision Profits Pre-Provision Provision and contingency PBDT Depreciation on Fixed Assets Extraordinary gain/ (loss) PBT Provision for tax PAT Share in associate profit Net Profit after MI Extraordinary gain/(loss) Adjusted Net Profit after MI EPS (F.V.10) FY12 3442.92 204.79 3647.71 407.60 489.50 2750.62 775.73 1974.89 17.37 0.00 1957.51 648.76 1308.75 0.06 1308.81 0.00 1308.81 57.86 FY13 3719.38 237.64 3957.02 443.17 456.23 3057.62 872.24 2185.38 22.71 0.00 2162.66 698.77 1463.89 -0.46 1463.95 0.00 1463.95 64.52 FY14 3751.54 526.44 4277.98 471.60 589.92 3216.46 1213.21 2003.25 32.78 0.00 1970.46 612.53 1357.94 0.00 1357.94 0.00 1357.94 59.85 FY15e 4091.54 299.08 4390.62 490.73 613.86 3286.03 1262.43 2023.60 38.90 0.00 1984.71 619.23 1365.48 0.00 1365.48 0.00 1365.48 60.18 FY16e 4590.25 458.70 5048.95 570.13 713.18 3765.64 1466.69 2298.95 38.91 0.00 2260.04 700.61 1559.43 0.00 1559.43 0.00 1559.43 68.72 11 Equities Derivatives Commoditie ities Distribution of Mutual Funds Dist istribution of Life Insurance 11 CD Equisearch Pvt Ltd Figures in Rs crore Consolidated Balance Sheet FY12 FY13 FY14 FY15e FY16e Share Capital 226.33 226.89 226.91 226.91 226.91 Reserves 5806.32 7110.98 8283.27 9648.75 11208.17 Total Shareholder’s Funds 6032.65 7337.87 8510.18 9875.65 11435.08 Long Term Borrowings 15160.25 20043.37 23962.08 28981.76 31300.30 Total Liabilities 21192.91 27381.26 32472.27 38857.42 42735.40 Fixed Assets 53.66 72.26 154.83 132.82 95.09 Tangible Asset 50.08 69.22 152.67 131.00 92.09 Intangible Asset 3.58 3.00 2.17 1.82 3.00 SOURCES OF FUNDS APPLICATION OF FUNDS Intangible Assets Under Development 0.00 0.04 0.00 0.00 0.00 16528.65 21248.57 23769.64 31413.06 34301.77 272.08 303.66 397.80 489.13 534.11 Inventory 0.93 0.00 0.00 0.00 0.00 Trade Receivables 0.26 0.05 1.91 1.82 1.90 Cash and Bank 5321.81 6351.73 7118.44 8481.06 9614.99 Current Investments 3394.17 2976.60 2037.46 1321.96 1444.96 Short term loans and advances 11064.14 15786.92 18412.32 22022.82 23689.38 80.12 77.16 80.01 89.90 90.23 Total CA & LA 19861.43 25192.46 27650.13 31917.56 34841.46 Current liabilities 12354.76 17137.80 17257.43 22116.87 23874.47 Provisions 1652.15 1451.36 1604.61 1911.64 2076.32 Total Current Liabilities 14006.91 18589.16 18862.03 24028.51 25950.79 Net Current Assets 5854.52 6603.30 8788.10 7889.05 8890.67 Net Deferred Tax 218.34 287.13 255.56 253.77 268.00 Other Assets (Net Of Liabilities) -1734.36 -1133.63 -893.67 -1320.42 1320.42 -1354.26 Total Assets 21192.91 27381.26 32472.27 38857.42 42735.40 Long Term Loans and Advances Non Current Investments Current Assets, Loans & Advances Other Current Assets 12 Equities Derivatives Commoditie ities Distribution of Mutual Funds Dist istribution of Life Insurance 12 CD Equisearch Pvt Ltd 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 FY12 FY13 FY14 FY15e FY16e 12.1 7.5 7.5 9.9 13.3 13.5 11.8 11.5 20.6 8.0 20.8 -7.2 -7.3 6.4 0.9 4.1 0.6 0.5 12.0 9.1 15.0 14.2 14.2 8.0 12.2 72.9 21.2 74.8 20.9 73.2 16.0 73.2 15.5 72.9 15.4 16.1 21.7 3.5 16.8 21.9 3.5 17.0 17.1 2.7 15.0 14.9 2.3 14.9 14.6 2.3 2.0 8.5 9.5 2.32 2.2 9.4 10.7 2.43 2.0 8.7 12.8 2.3 2.0 8.5 17.3 2.6 2.2 9.4 15.1 2.2 4.1 1.6 1.8 4.3 1.4 1.7 4.1 1.6 1.5 4.4 1.4 1.4 4.1 1.4 1.4 7.5 11.1 6.7 10.0 6.4 11.9 6.2 10.1 6.5 10.7 115.2 0.2 97.1 0.1 54.8 0.2 66.4 0.1 106.7 0.1 3.1 3.2 3.9 3.7 3.9 0.4 1.7 0.8 1.6 0.8 2.1 0.8 1.9 0.8 2.1 24.0 19.1 5.0 25.1 2.0 22.0 18.0 4.0 23.3 1.6 23.5 18.9 4.6 25.6 1.8 22.4 17.7 4.7 26.0 1.7 23.5 18.9 4.7 26.2 1.8 13 Equities Derivatives Commoditie ities Distribution of Mutual Funds Dist istribution of Life Insurance 13 CD Equisearch Pvt Ltd Outlook and Recommendation The commercial vehicle industry is expected to be benefited by higher freight rates, diesel price cuts and pick-up pick in the industrial cycle. As commercial vehicles, (especially M&HCVs), aree deployed on a large scale for infrastructural 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 assocciated with governmental 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 and speed-up 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 2014-15. 15. Easing of domestic supply bottlenecks and progress on the implementation of stalled projects already cleared should contribute to growth. The company has historically maintained 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 13-14, is further expected 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 where 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. We expect AUM (consolidated) to grow at a CAGR of atleast 11% between FY14 to FY16. Shriram enjoys ‘AA+’ credit rating from CRISIL aand 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 for 90-day 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. 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 Moreover, 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 management resources. Shriram Transport expect that with stable government in center center, estimates of better GDP growth rate, the company’s 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 track tr record of debt servicing, the company 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 6-12 6 months. 14 Equities Derivatives Commoditie ities Distribution of Mutual Funds Dist istribution of Life Insurance 14 CD Equisearch Pvt Ltd Disclaimer 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 ma is based 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 document. 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 information inform discussed in this material, there may be regulatory, complianc compliance, e, or other reasons that prevent us from doing so. Prospective investors and others are cautioned that any forward-looking looking statements are not predictions and may be subject to change without notice. If you have any questions about this report please get in touch with CD Equisearch Pvt. Ltd. CD Equisearch Pvt. Ltd. 10, Vaswani Mansion, 2nd Floor, Dinshaw Wachha Road, Churchgate Mumbai – 400 020. Phone: +91(22) 2283 0652 / 0653, Fax +91 (22) 2283 2276, Email: [email protected],Website: www.cdequi.com. 15 Equities Derivatives Commoditie ities Distribution of Mutual Funds Dist istribution of Life Insurance 15
© Copyright 2024