Shriram Transport Finance Corporation Ltd

shri ram

Shriram Transport Finance Corporation Ltd (STFC), a part of the “SHRIRAM” conglomerate, has significant presence in financial services viz., commercial vehicle financing business, consumer finance, life and general insurance, stock broking, chit funds and distribution of financial products such as life and general insurance products and units of mutual funds.

Incorporated in the year 1979 and registered as a Deposit taking NBFC with Reserve Bank of India, STFC was set up with the objective of offering the common man with a host of products and services that would be helpful to him on his path to prosperity. Over the decades, the company has achieved significant success in reaching this objective, and has created a tremendous sense of loyalty amongst its customers.

STFC decided to finance the much neglected Small Truck Owners. Shriram started lending to the Small Truck Owner to buy new trucks. But found a mismatch between the Aspiration and Ability. The Truck Operator was honest but the Equity at his command was not sufficient to support the credit levels required to buy a new truck. STFC helped them transition from being a driver to being an owner.

STFC is a part of a huge Shriram Group conglomerate that handles the financial services section of the group. The business dominates in financing vehicles especially in the rural areas and there it is beating its competitors. STFC is also engaged in pre-owned commercial vehicle (CV) financing business and offers ancillary services, such as finance for working capital, engine replacement, bill discounting, credit cards and tire-loans as the financial support system. Shriram Automall India Limited is the Company’s subsidiary.

STFC has performed quite well in the past few quarters with Net profit increasing QoQ, with profit of ₹448.68 Cr in the first quarter of the financial year 2017-18, ₹479.11 Cr in the second quarter (Sept 17), ₹495.63 Cr in the third quarter (Dec 17). The final quarter showed a dip in profit to as low as 144.60 Cr though the net sales increased at a substantial rate of 5.22%. The company maintains a healthy dividend payout of 18.53%.

The company is performing better as compared to previous years. Its net profit is increasing QoQ, as is its Net sales. It needs to focus on its ROE which is as low as 12.59% for the last 3 years which shows inefficiency in utilization of funds. The stock is currently priced at ₹1627.55 and is expected to go down to as low as ₹1407.74 with profit expected to decrease slightly but the net sales is expected to increase in the same rate in the coming 2 years.

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3M- An array of products

3M graphic

Compiled by Srishti Shrivastava

3M India Limited is the Indian arm of 3M Company, USA. The Company markets about 7000 products in India with leading positions in health care, industrial markets, display and graphics, consumer and office, transportation, safety, security and protection services. 3M is among the leading manufacturers of products for many of the markets it serves.

In India, 3M has manufacturing facilities at Ahmedabad, Bangalore, Pune and has a R&D Center in Bangalore. 3M India manages its operations in five operating business segments: Industrial and Transportation; Health Care; Display and Graphics; Consumer and Office and Safety, Security and Protection Services. These five business segments bring together common or related 3M technologies that enhance the development of innovative products and services and provide efficient sharing of business resources. These segments have worldwide responsibility for virtually all 3M product lines. The 3M products are sold either directly to users or through numerous wholesalers, retailers, converters, distributors and dealers in a wide variety of trades in many countries around the world. The Management of the Company believes that the confidence of wholesalers, retailers, converters, distributors and dealers in 3M and its products has contributed significantly to 3M India’s growth and its position in the marketplace.

Talking about the segment-wise growth drivers of 3M India, 3M Car Care sales growth was fueled by launch of new formats like fuel station outlets and mobile detailing units. The Traffic Safety & Security Division continues their growth path in the road safety market with launch of new products like Conspicuity Tapes, Solar RPMs, flexible median markers, etc. The division continues to educate the market with Night Demos, Key Opinion Leader(KOL) programs, Contractor Programs, etc., while participating in key industry events like Inter traffic, IRF (Indian Road Federation) Road Safety Week, IRC (Indian Road Congress) Annual Exhibitions, CII Conferences, NHAI events, etc., to propagate use of road safety products to save lives on the road.

3M Healthcare has been continuing efforts in digital space. Sales through e-commerce for both medical and dental products have gained traction and are achieving growth year on year. There is continued growth in the office supplies channels with Post-it & Scotch range of products aimed at office workforce segment.  For Renewable energy business, there is increased usage of Energy Management and safety films due to enhanced focus on energy efficiency & green buildings, security concerns and the growing usage of glass in commercial and residential complexes. The Go-to-Market strategy to expand reach into smaller cities through the extended sales representative model has been successfully scaled up leading to higher level of penetration of 3M products in markets that were earlier not covered.

Recently 3M India has partnered with Automotive OEM’s to develop products aimed at reducing diesel vehicle emissions, VOC free under body protection and reducing water use for car cleaning. Also, 3M aims to step up growth by leveraging domain expertise in domestic markets such as Consumer and Healthcare. 3M is also expanding the reach of its solutions that help combat deteriorating air quality and water quality. 3M is also leveraging its expertise in the area of sustainability to work with the Government and other Companies on green initiatives and solutions. 3M targets to have 10% of its sale through e-commerce in the next 5 years.

The Company registered an overall turnover growth of 10.53% for the financial year ended March 31, 2017. The Industrial business grew by 9.91%, health care business grew by 15.37%, safety and graphics business grew by 14.46%, consumer business grew by 10.56% and energy business grew by 4.68%.

I expect the company to grow at a rate of 21.74 percent based on how much are they reinvesting into the business and how well are they reinvesting using retention ratios and efficiency ratios. I expect the company to clock EPS of Rs.339.76 FY-19. Also, sales for the year 2019, is expected to grow at 21% when compared to previous year i.e. from Rs.2859 crores to Rs.3459.39 crores. Giving it a median PE of 70 the stock could go up to 23783.31 an upside potential of 16.18%.

https://drive.google.com/open?id=1eFRpgXqfPi6NP9PVryt_iLLQZPK6Komp

 

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