Shares of Shriram Transport Finance Corporation gained three percent intraday on October 29 as global brokerage houses remained bullish on the stock and raised their target price after the company posted double-digit profit growth in Q2 FY20.
The stock has gained 16 percent in the last three months. It was quoting at Rs 1,141.45, up Rs 29.30, or 2.63 percent on the BSE at 1355 hours IST.
With a buy call on the stock, Jefferies raised its target price to Rs 1,305 from Rs 1,270 earlier, implying a potential upside of 17 percent from current levels. It revised its FY20-21 EPS estimates by -0.2/2 percent, respectively, as it trims AUM growth and lifts NIM estimates. The brokerage said collection trends are within reasonable range and asset quality should be stable.
Citi also has a buy rating on the sock and increased its target price to Rs 1,330 from Rs 1,200 per share, implying a 20 percent potential upside from current levels as it raised its FY20/21 earnings estimates by 15 percent each, building in a lower tax rate.
The management expects benefit of lower cost of funds to flow through in coming quarters, it said, adding profit before tax declined a percent YoY due to higher provisions.
Shriram Transport’s Q2 profit grew 25.5 percent year-on-year to Rs 765.1 crore on lower tax rate while net interest income declined 0.9 percent YoY to RS 2,036.8 crore.
Provisions remained elevated at Rs 660.7 crore for the quarter-ended September, down 3.4 percent YoY and up 17.7 percent quarter-on-quarter. However, the provision coverage ratio improved to 32.1 percent from 31.8 percent QoQ.
Asset quality weakened sequentially with gross non-performing assets rising 28 bps QoQ to 8.8 percent and net NPA increasing 18 bps QoQ to 6.15 percent in the quarter-ended September.
News Source:- Moneycontrol