Buy Shriram City Union Finance; target of Rs 2000: Motilal Oswal

Motilal Oswal’s research report on Shriram City Union Finance

Shriram City Union Finance’s (SCUF) PAT increased 2% YoY to INR2.6b in 3QFY19 – a 10% beat – largely driven by provision write-back of INR161m. On a PPoP basis, there was a 12% miss on our estimates, mainly due to the slowdown on account of tight liquidity. Disbursements declined 29% QoQ/YoY to INR45b. Excluding gold finance, disbursements were down 31% YoY. 2W disbursements hit their lowest level in the last five quarters at INR10.5b, though traditionally 3Q has been the strongest quarter for 2W disbursements. Dec’18 accounted for 50% of 3Q disbursements. AUM grew 10% YoY to INR288b.


We believe RoE should recover to 15-16% levels from FY19 onwards, after three consecutive years of 12% RoE. Our FY19/20E estimates are largely unchanged. Maintain Buy with a TP of INR2,000 (1.7x Dec 2020E BVPS).