Reviews

Reviews

Reviews

In this edition, we have reviewed Shriram Transport Finance Company and ITC. We suggest our readerinvestors to HOLD in Shriram Transport Finance Company and ITC

We had previously recommended Shriram Transport Finance Company (STFC) in Volume 33, Issue No. 17, dated July 23 – August 5, 2018 under the ‘Analysis’ segment. The scrip was then recommended at Rs 1,264.50, based on improving rural market and lower credit cost which are growth drivers for the company.

STFC is a NBFC having significant presence in varied financial services such as consumer finance, broking, life and general insurance, etc. On the quarterly financial front, STFC reported a growth in AUM by 3.58 per cent to Rs 1,08,120.24 crore in Q2FY20 from Rs 10,43,79.83 crore in Q2FY19. The total income for Q2FY20 rose by 6.89 per cent to Rs 4,219.82 crore in Q2FY20 as compared to Rs 3,947.75 crore in Q2FY19. Its NII, which includes direct assignment income of Rs 3.89 crore, reduced by 0.69 per cent to Rs 2,036.76 crore in Q2FY20 from Rs 2,050.91 crore in Q2FY19.

The company gained a net profit of Rs 765.05 crore in Q2FY20, which is a significant increase by 25.5 per cent from net profit of Rs 609.58 crore gained in Q2FY19. On the annual financial front, the company reported an increase of 8.54 per cent in AUM to Rs 1,04,482.29 crore in FY19 from Rs 96,260.61 crore in FY18.

The NII for FY19 increased by 15.06 per cent to Rs 7,807.54 crore as compared to Rs 6,785.24 crore in FY18. STFC gained a net profit of Rs 2,563.99 crore in FY19, clocking a growth of 4.2 per cent compared to Rs 2,460.54 crore gained in FY18. The company’s core book growth looks impressive for the past quarters. Stable margins and higher used CV disbursals are factors in favour of the company. 

Hence, we recommend a HOLD.

We had previously recommended Imperial Tobacco Company of India (ITC) in Volume 34, Issue No. 04, dated January 21 - February 03, 2019, under the ‘Choice Scrip’ segment. The stock was then trading at Rs 296.60 and was recommended based on the company’s differentiated product development capacity, robust portfolio of brands, and efficient marketing and distribution network. ITC is a conglomerate boasting a vibrant portfolio of businesses encompassing FMCGs, hotels, paperboards and speciality papers, packaging, agri-business and IT. On a consolidated quarterly front, its net sales posted growth of 6.16 per cent to Rs 12,759.44 crore in Q2FY20 from. Rs 12,018.61 crore in Q2FY19. The company reported an operating profit of Rs 5,042.11 crore in Q2FY20, up by 11.32 per cent from Rs 4,529.46 crore in Q2FY19. Its net profit grew by 37.01 per cent to Rs 4,174.69 crore in Q2FY20 from Rs 3,047.01 crore in Q2FY19. 

On an annual basis, its net sales were reported at Rs 49,862.11 crore in FY19, up by 4.56 per cent from Rs 47,688.55 crore in FY18. The company reported an operating profit of Rs 19,149.82 crore, increasing by 10 per cent from Rs 17,409.11 crore in FY18. Similarly, its net profit saw growth of 11.69 per cent to Rs 12,835.90 crore in FY19 from Rs 11,492.68 crore in the previous fiscal year. The company has taken several proactive measures to combat the economic slowdown in consumption by enhancing direct reach, increasing the frequency of market servicing, introducing targeted offers for valueseeking consumers, investing in e-commerce, and extending credit judiciously to select trade partners. Thus, we recommend a HOLD.

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