1. automotive and vehicles
2. commercial vehicles

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: research@cdequi.com
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
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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
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Distribution of Mutual Funds
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istribution of Life Insurance
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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
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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
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Commoditie
ities
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Dist
istribution of Life Insurance
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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
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ities
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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
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ities
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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
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ities
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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
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ities
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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.
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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: research@cdequi.com,Website: www.cdequi.com.
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ities
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