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SHTF has close to 25% market share in the used CV segment and, therefore, it is difficult to grow at a rate much faster than that of industry. The management guided that based on average GDP forecast of 6-6.5% over next three years, AUM growth is likely to be around 15% over FY13-16E.
The management said asset quality might not improve in next 1-2 quarters due to pressure on freight rate. However, the company is confident of maintaining gross NPAs in the range of 2.8-3.1% and credit cost at 1.8-2%.
SHTF is unlikely to be the biggest beneficiary of falling wholesale cost of funds. Banks are unlikely to cut lending rates. Therefore, cost of borrowings from banks is unlikely to reduce in near term. However, liquidity in the market has improved. The management states that margins for FY14E should remain largely flat over FY13.
We maintain neutral on the company with a target price of R705.