Jefferies believe muted CV sales near term is temporary and should improve in 2H
We believe muted CV sales near term is temporary and should improve in 2H. Shift to new/ lower vintage CV segment will be yield dilutive, but with borrowing costs falling, NIMs should be stable. With recoveries esp. in CE book likely to improve in 2H, credit costs could surprise positively. We lift FY17-18E EPS by 3.7-4% and PT to Rs 1,425. Reiterate ‘buy’.
CV sales was muted in the last few months, partly due to subdued activity levels owing to heavy rains. We believe activity levels and truck operator utilization should improve in 2H as construction, infra and mining activity pick up post monsoon. Potential rural recovery should also support better CV demand. We lift our FY17-18E AUM estimates by 2%. We forecast AUM to grow at 16.5% CAGR over FY16-18e.
SHTF has stopped financing used CVs in “over 10 yr” vintage segment (6% of AUM). It is now targeting used CVs in 4-6 year vintage segment. Mix of lower yield new CV AUM should also rise given strong disbursal growth in this segment. Shift in mix could affect yields by around 30bps in next two years, but this could be offset by lower borrowing costs.