Buy Shriram City Union Finance; target of Rs 2150: Motilal Oswal

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Motilal Oswal's research report on Shriram City Union Finance

SCUF reported a healthy disbursement momentum despite seasonality (relative to 3Q of the fiscal year). Product mix change in favor of personal loans has aided yields while improvement in borrowing costs has allowed SCUF to deliver healthy spreads/margins. Asset quality exhibited significant improvement with GS3 declining ~100bp QoQ without having to resort to elevated write-offs (like in SHTF) and is perhaps the best in the last six years. Shriram Housing continues to demonstrate a lot of promise in all aspects ranging from AUM growth, margins and asset quality. Technical reasons (of a potential supply overhang after the merger) aside, the merged entity will emerge stronger than the respective standalone businesses.

Outlook

We maintain our BUY rating with a TP of INR2,150 (based on 1.3x FY24E BVPS).

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