shriramtransport pinc research

1

RESEARCHRESEARCHRESEARCHRESEARCHRESEARCH

Analyst - Chandana jha I [email protected] I Tel: +91-22-6618 6398

STOCK DATA

SHAREHOLDING PATTERN (%)

STOCK PERFORMANCE (%)

STOCK PRICE PERFORMANCE

KEY RATIOS

Market Capitalisation Rs 54 bnBook Value per share Rs.60Equity Shares O/S (F.V. Rs.10) 1.9 bnMedian Volumes (12 mths) 65,305 (BSE+NSE)52 Week High / Low Rs. 295/ 111BSE Scrip Code 511218NSE Scrip Code SRTRANSFINBloomberg Code SHTF@INReuters Code SRTR.BO

Qtr. Ended Mar-07 Jun-07 Sep-07

Promoter 42.6 42.6 44.8

MFs/FI 2.4 3.4 4.5

FII/NRI/OCB 16.0 15.8 14.4

PCB 6.5 6.4 6.0

Indian Public/Others 32.4 31.9 30.3

1M 3M 12M

Absolute 29.8 61.6 128

Relative 27.6 29.5 63.1

SHRIRAM TRANSPORT FINANCE COMPANY LTD.

Event Update BUY

Sector Financial I CMP Rs 285 I Target Rs 372

Shriram Transport Finance Company Ltd. (STFCL) announced raising of Rs6bn

through preferential issue of 12mn shares and 8mn warrants to promoters at

Rs300/share. The allotment is to Blue Ridge (6.8mn shares), Kampani

Investments (1.2mn shares), Tiger Global (4mn shares) and Shriram Holdings

(8mn shares). This will result in an equity dilution of 11% to Rs2.1bn and

networth will consequently increase by 84% to Rs19.8bn.

Key takeaways from the update:

The capital raising by STFCL is one of the largest by any NBFCs in India and

will be utilised towards funding its growth plans.

STFCL has been witnessing high asset growth in H1FY08 (62%) and the

dilution will help shore up its networth. This will enable STFCL to sustain its

momentum in disbursements and business growth through branch expansion

and addition to workforce. STFCL targets 400 branches by end-FY08.

STFCL continues to remain a market leader in pre-owned CV financing

(constitutes 76% of total CV portfolio) and has created a niche in valuation of

pre-owned trucks and efficiency in the collection system. They have a large

customer base established over a decade.

The company plans to foray into financing construction equipment,

passenger vehicles and tractors. It has entered into a tie up with Ashok Leyland

for bill discounting and has set up a 40:60 JV, Ashley Transport Services.

A tie-up with private financiers for origination of loans is enabling them to

generate 20% of incremental disbursements through their current network

of 250 such financiers.

Steady income accretion from securitization, ability to maintain NIM above

8% and strong asset growth over the next 3 years due to improved leveraging

ability will aid in sustaining growth momentum. Thus, we have revised our

FY09 net profit estimate upwards by 2.5% to Rs4.5bn.

At the CMP of Rs285, STFCL is trading at a P/E of 13.1x FY09 EPS of

Rs 21.7 and a P/BV of 2.4x. We value the stock at a sustainable RoE of 23.5%,

FY09 BV of Rs114 and fair P/BV of 3.25x. Considering its strong franchise

network, scalability and earnings visibility, we maintain our ‘BUY’

recommendation and revise our 12-month price target upwards to Rs372,

which represents a 31% upside from the CMP.

14 November 2007

Yr Ended EPS BV RoAA RoNW P/BV P/E(March) (Rs.) (Rs) (%) (%) (x) (x)

2007 9.9 56.0 2.49 19.9 5.0 28.7

2008E 15.1 93.5 2.46 20.9 3.0 18.8

2009E 21.7 114.4 2.36 20.8 2.4 13.1

KEY FINANCIALS (CONSOLIDATED)

Yr Ended Op YoY Gr Op Op Marg Net Eq(March) Income (%) Profits (%) Profits Capital

2007 14,155 55.8 4,557 32.2 1,904 184

2008E 23,690 67.4 6,991 29.5 3,205 212

2009E 35,650 50.5 9,635 27.0 4,594 212

(Rs Mn)

100

150

200

250

300

Oct-06 Jan-07 Apr-07 Jul-07 Oct-07

STFCL BSE (Rebased)

Note: Valuations are on fully diluted basis

2

Quarter Ended Year EndedParticulars (Rs Mn)

30/09/07 30/09/06 Gr % 30/09/07 30/09/06 Gr % 31/03/07

Operating income 5,603 3,161 77.2 10,239 5,870 74.4 13,964

Other Income 92 21 345.4 168 63 167.8 192

TTTTTotal Incomeotal Incomeotal Incomeotal Incomeotal Income 5 , 6 9 55 , 6 9 55 , 6 9 55 , 6 9 55 , 6 9 5 3 , 1 8 23 , 1 8 23 , 1 8 23 , 1 8 23 , 1 8 2 7 9 . 07 9 . 07 9 . 07 9 . 07 9 . 0 1 0 , 4 0 71 0 , 4 0 71 0 , 4 0 71 0 , 4 0 71 0 , 4 0 7 5 , 9 3 35 , 9 3 35 , 9 3 35 , 9 3 35 , 9 3 3 75.4 1 4 , 1 5 51 4 , 1 5 51 4 , 1 5 51 4 , 1 5 51 4 , 1 5 5

Interest expended 2,869 1,576 82.1 5,175 2,959 74.9 7,239

Operating expense 1,301 994 30.9 2,499 1,704 46.7 3,922

TTTTTotal Expenditureotal Expenditureotal Expenditureotal Expenditureotal Expenditure 4 , 1 7 04 , 1 7 04 , 1 7 04 , 1 7 04 , 1 7 0 2 , 5 7 02 , 5 7 02 , 5 7 02 , 5 7 02 , 5 7 0 6 2 . 36 2 . 36 2 . 36 2 . 36 2 . 3 7 , 6 7 47 , 6 7 47 , 6 7 47 , 6 7 47 , 6 7 4 4 , 6 6 34 , 6 6 34 , 6 6 34 , 6 6 34 , 6 6 3 64.6 1 1 , 1 6 21 1 , 1 6 21 1 , 1 6 21 1 , 1 6 21 1 , 1 6 2

Operating profitOperating profitOperating profitOperating profitOperating profit 1 , 5 2 51 , 5 2 51 , 5 2 51 , 5 2 51 , 5 2 5 6 1 36 1 36 1 36 1 36 1 3 1 4 9 . 01 4 9 . 01 4 9 . 01 4 9 . 01 4 9 . 0 2 , 7 3 22 , 7 3 22 , 7 3 22 , 7 3 22 , 7 3 2 1 , 2 7 01 , 2 7 01 , 2 7 01 , 2 7 01 , 2 7 0 115.2 2 , 9 9 42 , 9 9 42 , 9 9 42 , 9 9 42 , 9 9 4

Depreciation 54 24 124.8 97 49 97.1 98

P B TP B TP B TP B TP B T 1 , 4 7 11 , 4 7 11 , 4 7 11 , 4 7 11 , 4 7 1 5 8 85 8 85 8 85 8 85 8 8 1 5 0 . 01 5 0 . 01 5 0 . 01 5 0 . 01 5 0 . 0 2 , 6 3 62 , 6 3 62 , 6 3 62 , 6 3 62 , 6 3 6 1 , 2 2 11 , 2 2 11 , 2 2 11 , 2 2 11 , 2 2 1 115.9 2 , 8 9 52 , 8 9 52 , 8 9 52 , 8 9 52 , 8 9 5

Tax 511 193 164.4 909 415 118.9 988

Net ProfitNet ProfitNet ProfitNet ProfitNet Profit 9 5 99 5 99 5 99 5 99 5 9 3 9 53 9 53 9 53 9 53 9 5 1 4 2 . 91 4 2 . 91 4 2 . 91 4 2 . 91 4 2 . 9 1 , 7 2 71 , 7 2 71 , 7 2 71 , 7 2 71 , 7 2 7 8 0 58 0 58 0 58 0 58 0 5 114.4 1 , 9 0 71 , 9 0 71 , 9 0 71 , 9 0 71 , 9 0 7

Equity capital ( FV Rs 10) 1,911 1,563 1,911 1,563 1,842

EPS for the period(Rs)EPS for the period(Rs)EPS for the period(Rs)EPS for the period(Rs)EPS for the period(Rs) 5 . 0 25 . 0 25 . 0 25 . 0 25 . 0 2 2 . 5 32 . 5 32 . 5 32 . 5 32 . 5 3 9 . 09 . 09 . 09 . 09 . 0 5 . 1 55 . 1 55 . 1 55 . 1 55 . 1 5 1 0 . 41 0 . 41 0 . 41 0 . 41 0 . 4

OPM (%)OPM (%)OPM (%)OPM (%)OPM (%) 2 6 . 7 82 6 . 7 82 6 . 7 82 6 . 7 82 6 . 7 8 1 9 . 2 51 9 . 2 51 9 . 2 51 9 . 2 51 9 . 2 5 2 6 . 2 62 6 . 2 62 6 . 2 62 6 . 2 62 6 . 2 6 2 1 . 4 02 1 . 4 02 1 . 4 02 1 . 4 02 1 . 4 0 2 1 . 12 1 . 12 1 . 12 1 . 12 1 . 1

NPM (%) 16.84 12.41 16.59 13.57 13.5

N I MN I MN I MN I MN I M 8 . 3 68 . 3 68 . 3 68 . 3 68 . 3 6 8 . 9 78 . 9 78 . 9 78 . 9 78 . 9 7 8 . 4 08 . 4 08 . 4 08 . 4 08 . 4 0 9 . 0 09 . 0 09 . 0 09 . 0 09 . 0 0 9 . 2 09 . 2 09 . 2 09 . 2 09 . 2 0

Financial Results for the quarter & half year ended 30 September 2007Half Year Ended

Note: Provisions are included in op. expenses as per BSE format. Therefore, op. profit and OPM of FY07 is different from key financials and abridgedfinancials.

3

Income Statement 2006 2007 2008E 2009E

Operating Income 8,984 13,963 23,607 35,562

Other Income 102 192 83 88

TTTTTotal Incomeotal Incomeotal Incomeotal Incomeotal Income 9 , 0 8 79 , 0 8 79 , 0 8 79 , 0 8 79 , 0 8 7 1 4 , 1 5 51 4 , 1 5 51 4 , 1 5 51 4 , 1 5 51 4 , 1 5 5 2 3 , 6 9 02 3 , 6 9 02 3 , 6 9 02 3 , 6 9 02 3 , 6 9 0 3 5 , 6 5 03 5 , 6 5 03 5 , 6 5 03 5 , 6 5 03 5 , 6 5 0

Interest Expanded 4,151 7,239 12,445 19,836

Operating expenses 1,831 2,258 4,166 6,090

Depreciation 102 101 88 89

Operating ProfitOperating ProfitOperating ProfitOperating ProfitOperating Profit 3 , 0 0 33 , 0 0 33 , 0 0 33 , 0 0 33 , 0 0 3 4 , 5 5 74 , 5 5 74 , 5 5 74 , 5 5 74 , 5 5 7 6 , 9 9 16 , 9 9 16 , 9 9 16 , 9 9 16 , 9 9 1 9 , 6 3 59 , 6 3 59 , 6 3 59 , 6 3 59 , 6 3 5

Provisions 841 1,665 2,245 2,696

P B TP B TP B TP B TP B T 2 , 1 6 22 , 1 6 22 , 1 6 22 , 1 6 22 , 1 6 2 2 , 8 9 22 , 8 9 22 , 8 9 22 , 8 9 22 , 8 9 2 4 , 7 4 64 , 7 4 64 , 7 4 64 , 7 4 64 , 7 4 6 6 , 9 3 96 , 9 3 96 , 9 3 96 , 9 3 96 , 9 3 9

Tax 745 988 1,541 2,345

Net ProfitsNet ProfitsNet ProfitsNet ProfitsNet Profits 1 , 4 1 71 , 4 1 71 , 4 1 71 , 4 1 71 , 4 1 7 1 , 9 0 41 , 9 0 41 , 9 0 41 , 9 0 41 , 9 0 4 3 , 2 0 53 , 2 0 53 , 2 0 53 , 2 0 53 , 2 0 5 4 , 5 9 44 , 5 9 44 , 5 9 44 , 5 9 44 , 5 9 4

Fully dil. Eq. sh. O/s (mn) 150.6 184.2 211.9 211.9

Book Value (Rs) 55 60 93.5 114

Basic EPS (Basic EPS (Basic EPS (Basic EPS (Basic EPS (Rs)Rs)Rs)Rs)Rs) 9 . 49 . 49 . 49 . 49 . 4 1 0 . 31 0 . 31 0 . 31 0 . 31 0 . 3 1 5 . 71 5 . 71 5 . 71 5 . 71 5 . 7 2 2 . 52 2 . 52 2 . 52 2 . 52 2 . 5

Cash Flow Statement 2006 2007 2008E 2009E

% of average interest bearing assets% of average interest bearing assets% of average interest bearing assets% of average interest bearing assets% of average interest bearing assets

Operating Income 16.73 14.09 14.64 15.63

Interest & Finance Charges 7.73 7.30 7.72 8.72

Net Interest Income 9.00 6.78 6.92 6.91

Other Income 0.19 0.19 0.05 0.04

Operating Income 9.19 6.98 6.97 6.95

Staff Cost 0.79 0.67 1.70 1.79

Overheads and Depreciation 2.63 0.05 0.89 0.88

Operating Costs 3.41 0.73 2.58 2.68

Pre-provision op. profit 5.78 6.25 4.39 4.27

Loan Loss provisions 1.57 1.68 1.39 1.18

Profit Before Taxes 4.03 2.92 2.94 3.05

Taxes 1.39 1.00 0.96 1.03

RoAA 3.98 2.49 2.46 2.36

Avg. Assets/Avg. net worth 6.73 8.00 8.52 8.83

RoE 26.76 19.94 20.99 20.86

Key Ratios 2006 2007 2008E 2009E

OPM(%) 33.0 32.2 29.5 27.0

NPM(%) 15.6 13.5 13.5 12.9

RoAA(%) 3.98 2.49 2.46 2.36

RoANW(%) 26.8 19.9 20.9 20.8

GNPA 2.03 2.07 2.08 2.06

NNPA 1.28 1.22 1.20 1.00

Book Value(Rs) 44.2 56.0 93.5 114.4

Total Income/Total Assets (x) 0.17 0.14 0.15 0.16

PBT/avg assets(%) 6.1 3.8 3.6 3.6

Cost Income Ratio (%) 20.2 5.1 17.6 17.1

P/E (x) 38.0 28.7 18.8 13.1

P/BV (x) 6.4 5.0 3.0 2.4

Balance Sheet 2006 2007 2008E 2009E

Equity Share Capital 1,506 1,842 2,039 2,039

Optianally convert. warrants 199 77 80 80

Suspense account 186 - - -

Reserves & Surplus 6,462 8,822 17,784 22,216

Net worthNet worthNet worthNet worthNet worth 8 , 3 5 38 , 3 5 38 , 3 5 38 , 3 5 38 , 3 5 3 1 0 , 7 4 11 0 , 7 4 11 0 , 7 4 11 0 , 7 4 11 0 , 7 4 1 1 9 , 9 0 31 9 , 9 0 31 9 , 9 0 31 9 , 9 0 31 9 , 9 0 3 2 4 , 3 3 52 4 , 3 3 52 4 , 3 3 52 4 , 3 3 52 4 , 3 3 5

Total Loans

(secured & unsecured) 43,964 87,384 140,454 202,370

Deferred Tax liability 1,337 866 866 866

Employee stock option o/s 35 123 123 123

Capital EmployedCapital EmployedCapital EmployedCapital EmployedCapital Employed 5 3 , 6 8 95 3 , 6 8 95 3 , 6 8 95 3 , 6 8 95 3 , 6 8 9 9 9 , 1 1 59 9 , 1 1 59 9 , 1 1 59 9 , 1 1 59 9 , 1 1 5 1 6 1 , 3 4 61 6 1 , 3 4 61 6 1 , 3 4 61 6 1 , 3 4 61 6 1 , 3 4 6 2 2 7 , 6 9 42 2 7 , 6 9 42 2 7 , 6 9 42 2 7 , 6 9 42 2 7 , 6 9 4

Fixed Assets 1,568 1,276 1,188 1,099

Net current assets 52,025 95,193 154,628 218,363

Investments 92 2,246 5,131 7,832

CWIP 0 399 399 399

Misc exp. 4 1 0 1

TTTTTotal Assetsotal Assetsotal Assetsotal Assetsotal Assets 5 3 , 6 8 95 3 , 6 8 95 3 , 6 8 95 3 , 6 8 95 3 , 6 8 9 9 9 , 1 1 59 9 , 1 1 59 9 , 1 1 59 9 , 1 1 59 9 , 1 1 5 1 6 1 , 3 4 61 6 1 , 3 4 61 6 1 , 3 4 61 6 1 , 3 4 61 6 1 , 3 4 6 2 2 7 , 6 9 42 2 7 , 6 9 42 2 7 , 6 9 42 2 7 , 6 9 42 2 7 , 6 9 4

Year Ended March (Figures in Rs Mn)

4

Equity Desk

R. Baskar Babu - Head - Equity Broking

[email protected] 91-22-66186465

Gealgeo V. Alankara - Head - Institutional Sales


Sachin Kasera - Co-Head - Domestic Equities


Research

Sameer Ranade - Capital Goods / Utilities


Sujit Jain - Real Estate / Construction


Amol Rao - Hospitality / Pipes / Packaging


Nirav Shah - Sugar / Textiles


Nakul Dharmawat - Cement / Building Products


Rishabh Bagaria - Auto / Auto Ancilliary


Ruchir Desai - Technology


Syed Sagheer - Logistics / Light Engineering


Chandana Jha - Banking / Financial Services


Rahhul Aggarwal - Metals


Dipti Solanki - Media


Faisal Memon - Associate - Metals


Ashish Dangi - Associate - Lifestyle / Retail Products


Ashwani Agarwalla - Associate -Agro Products / Fertilizers


Abhishek Gangwani -Associate - Electronics / Hardware


Sales:

Anil Chaurasia Alok Doshi

91-22-66186462 91-22-66186375

Sapna Mehta Sundeep Bhat

91-22-66186391 91-22-66186641

Dealing:

Rajesh Khanna / Raju Bhavsar / Pratiksha


Shivkumar R / Manoj Parmar / Hasmukh Prajapati


Derivative Desk

Sailav Kaji - Head - Derivatives & Strategist


Janakiram Karra


Anand Kuchelan


Shailesh Kadam


Ketan Chaurasia


Directors

Gaurang Gandhi


Hemang Gandhi


Ketan Gandhi


Rakesh Bhatia - Head Compliance


Team

5

bright thinking

Member : Bombay Stock Exchange & National Stock Exchange of India Ltd. : Sebi Reg No: INB 010989331. Clearing No : 2111216, Maker Chambers V, Nariman Point, Mumbai - 400 021; Tel.: 91-22-66186633/6400 Fax : 91-22-22049195

Financial Securities Ltd

SMALL WORLD, INFINITE OPPORTUNITIES

Infinity.com

Disclaimer: This document has been prepared by the Research Desk of M/s Infinity.com Financial Securities Ltd. (PINC) and is meant for use of the recipientonly and is not for public circulation. Each recipient of this document should make such investigations as it deems necessary to arrive at an independentevaluation of an investment in the securities of companies referred to in this document (including the merits and risks involved), and should consult its ownadvisors to determine the merits and risks of such an investment. The investment discussed or views expressed may not be suitable for all investors

The information contained herein is obtained and collated from sources believed reliable and PINC has not independently verified all the information givenin this document. Accordingly, no representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of the information andopinions contained in this document.

The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and should not be treated as endorsementof the views expressed in the report. The opinion expressed or estimates made are as per the best judgement as applicable at that point of time and PINCreserves the right to make modifications and alternations to this statement as may be required from time to time without any prior approval

PINC, its affiliates, their directors, employees and their dependant family members may from time to time, effect or have effected an own account transactionin, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to perform investment banking or other servicesfor, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a separate, distinct andindependent of each other. The recipient should take this into account before interpreting the document

This report has been prepared on the basis of information, which is already available in publicly accessible media or developed through analysis of PINC. Theviews expressed are those of analyst and the PINC may or may not subscribe to all the views expressed therein

This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any otherperson or published, copied, in whole or in part, for any purpose. Neither this document nor any copy of it may be taken or transmitted into the United State(to U.S.Persons), Canada, or Japan or distributed, directly or indirectly, in the United States or Canada or distributed or redistributed in Japan or to anyresident thereof. The distribution of this document in other jurisdictions may be restricted by law, and persons into whose possession this document comesshould inform themselves about, and observe, any such restrictions

Neither PINC, not its directors, employees, agents or representatives shall be liable for any damages whether direct or indirect, incidental, special orconsequential including lost revenue or lost profits that may arise from or in connection with the use of the information.

Copyright in this document vests exclusively with PINC and this document is not to be reported or circulated or copied or made available to others.

shriramtransport pinc research

Documents