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Shriram Transport Finance (Mkt Cap USD3.3b, CMP Rs.663, Buy)



SHTF reported 3QFY11 PAT growth of 27% YoY at Rs.3b (against our estimate of Rs.3.3b, 41% YoY).

Net income (including income from securitization of Rs.4b) was up 45% YoY at Rs.8.5b. NIMs on AUM improved to 8.91%

Utilization of excess liquidity and resort to securitization led to lower borrowings in 3QFY11. Borrowings were down 6.3% YoY (up 3.9% QoQ) at Rs.211b.

Operating expenses grew 67% YoY and 8.1% QoQ. Cost to income ratio was sequentially stable at 25.7% (22.3% in 3QFY10).

Gross NPA declined QoQ to 2.4% from 2.54% at the end of 2QFY11. Provision coverage ratio was 80.7%.

The stock trades at 2.5x FY12E BV.
Maintain Buy with a target price of Rs.930 (2.8x FY13E BV).