While market challenges proved as a dampener on disbursals (used de-grew 18% YoY) and core AUMs reported mere 12% YoY, SHTF maintained decent earnings performance with PAT growing 17% YoY at Rs 6.4bn (PLe: Rs 6.1bn). Beat on numbers were largely driven by NII putting up healthy 15% YoY growth translating into healthy 17%+ YoY growth in PPoP indicating core metrics remaining strong for SHTF. While NIMs at 7.4% were maintained, funding costs pressures have been rightly compensated by rebound in asset quality w.r.t. absolute GNPAs declining (1.4% YoY) and credit costs reducing YoY and QoQ (22bps). While Management stands confident of the used CV financing demand catching up on the back of BSVI shift and operators cash flows remaining intact, we continue to incorporate market headwinds and foresee AUM growing at 14% YoY growth for FY19 and 16-17% over FY20-21E. margin pressures in FY19 (7.7% down from 7.9% in FY18, inching up to 7.9% over FY20-21E) getting offset by improving credit costs (2.4% in FY19 down from 3.7%in FY18; further declining to 2.1% by FY21E) and operating leverage (22-23% cost-income over FY19-21E). Despite spelling conservatism, RoAs that take a beating in FY19 to 2.6% (from 2.9% in FY18) enhancing to 2.7%-2.8% over FY20-21E and RoEs ranging between 18-19% over FY19-21E reinforces our confidence in BS and sustainability of quality earnings ahead
At compelling valuations that adequately price-in most of the current apprehensions, we reiterate BUY with a price target at Rs1,657 valuing SHTF at 2.0x Sep-21 ABV.