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Result Highlights

* In Q4 FY21, SHTF delivered continuity in terms of growth recovery, collection improvement, controlled NPLs and palatable credit cost.  

* Disbursements were significantly higher yoy in Q4, led by used vehicles financing segment, where the portfolio grew well ahead of the overall AUM at 3.5% qoq and 11% yoy

Our view –

Delivers on expectations in Q4; resilience during the second wave will be a key monitorable: As per the management, the demand and pricing of used vehicles has been resilient thus far in the second wave, and no broad‐based idling of vehicles in being experienced as movement of goods is largely unaffected barring the strict lockdown areas.   

SHTF is much strongly placed to navigate the second wave of the pandemic due to a) large additional provisioning buffer/management overlay provisions at 2.3% of AUM, b) lower restructured stock (0.5% of AUM) and ECLGS disbursements (0.6%), c) marginal impact thus far on customers/vehicle utilization and demand/pricing of used vehicles and d) robust liquidity (16‐17% of borrowings) and capital position (Tier‐1 at 20%). We see only marginal risk to our current growth and credit cost assumptions. Additionally, palatable valuation at 1.5x FY23 P/ABV could act as cushion for the stock. We retain BUY and 12m PT of Rs1700.    

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