Shriram Transport Finance Share price: Technical and Fundamental Details highlighted

HDFC Securities says that investors can buy Shriram Transport Finance on dips to to Rs 1225 and add more on Rs 1084. They expect the Base case fair value of Rs 1362 and the Bull case fair value of Rs 1503 over the next 2 quarters. Shriram Transport Finance share price today is Rs 1418, down Rs 10 or 0.7%.

With vast 40 years of experience and unique business model, Shriram Transport Finance is a dominant player in the industry. The company commands 16% share in India’s commercial vehicle (CV) financing market and 40% share in the NBFC CV financing space. As a part of the Shriram Group, the company derives considerable management, operational and financial support from group companies.

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A faster recovery of the rural sector and a good Rabi harvest is expected to drive rebound in rural demand and Shriram Transport Finance with around 50% of branches in rural & semi urban areas is at clear advantage. An improvement in demand and better availability of funds could further improve Shriram Transport Finance growth prospects.

Shriram Transport Finance has a comprehensive Risk Management Policy in place and has laid down a well-defined risk management framework to identify, assess and monitor risks and strengthen controls to mitigate risks. In our view, its undisputed leadership, deep penetration and niche positioning is a strong moat of the company. Once the pandemic easies and economy is back on track, HDFC Securities expect Shriram Transport Finance business to stabilize and is well-placed to capitalize on CV cycle recovery going forward.

Shriram Transport Finance Valuations & Recommendation:

Despite a difficult environment, the company delivered decent growth in 9M FY21. There might be near term volatility in the performance of the company due to uncertainty in prevailing in the industry. HDFC Securities expect from FY22 things will normalize and we will see a sharp uptick in the earnings.

Shriram Transport Finance Management has guided AUM growth of 6% in FY21 and double digit in FY22. Shriram Transport Finance has envisaged 6% CAGR for NII and 15% CAGR for Adjusted Net Profit over FY20-23E. With incremental unlocking of the economy the demand will improve from FY22E. HDFC Securities have estimated 8% CAGR for AUM over FY20-22E. HDFC Securities expect a sharp rise in GNPAs in FY21E. RoAA is estimated at 2.76% in FY23E compared to 2.28% in FY20.