Shriram Transport Finance gains over 6% post March quarter results

Analysts at UBS maintained 'BUY
Shares of Shriram Transport Finance rose 6.34 per cent to Rs 675.75 on the BSE on Thursday after the company reported a 7.5 per cent growth year-on-year (YoY) growth in March quarter (Q4FY20) revenue to Rs 4,173.04 crore.

The non-banking financial company's consolidated net profit, though, declined 70 per cent YoY to Rs 223.38 crore for the quarter, largely because of the credit loss provision of Rs 909.64 crore the company made on account of the Covid-19 impact.

"The company has used relevant indicators of moratorium, considering various measures taken by government and other authorities along with an estimation of potential stress on probability of defaults and loss given defaults due to COVID-19 situation," Shriram Transport Finance said in a regulatory filing.

For the full fiscal year, net profit was nearly flat at Rs 2,501.84 crore as against Rs 2,563.99 crore in the preceding fiscal. Income in FY20 rose to Rs 16,582.63 crore from Rs 15,556.66 crore.

Further, the company also declared that the interim dividend of Rs 5 per equity share paid in November 2019 shall be the final dividend for 2019-20 in order to conserve cash resources to face the challenges and the contingencies created by COVID-19.

At 10:17 AM, the stock was up 5.52 per cent at Rs 670.55. The stock had plunged 3.2 per cent to Rs 605 in opening deals before staging a smart recovery. Around 55.17 lakh shares have changed hands on the BSE and NSE, combined, so far.

Analysts at UBS maintained 'BUY" on the stock with the price target of Rs 1,000, saying the risk-reward was "very favourable" at current levels.

"Due to lockdown, SHTF was able to collect from only 23 per cent of borrowers in April'20; however, the company collected from 52 per cent of borrowers in May'20 with total collection efficiency closer to 40 per cent. With lockdown restrictions getting relaxed, SHTF expects collections to improve further in June/July'20," UBS said in a note.

"We believe SHTF is likely to be relatively less impacted than other financiers given that about 62-63 per cent of asset under management (AUM) is towards used trucks and LCVs which run on shorter routes; these trucks also transport essential commodities and the cash flow impact is likely to be lower in an economic slowdown. Secondly, loan-to-value (LTV) ratios are lower at 65-70 per cent for SHTF customers; and driver shortage will likely hit large fleet operators and will ensure better freight availability for owner-drivers (which constitute 75 per cent of SHTF's AUM)," it said.


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