Emkay Global Financial Services has maintained 'Accumulate' on Shriram City Union Finance (SCUF) after the announcement of company's first quarter results. The stock broker fixed price target to Rs 2,013.
Commenting on the results, Emkay Global said, ''SCUF Q1FY16 performance met our expectations on all counts. AUMs grew at a healthy pace driven by strong traction in the gold and MSME segments. Margins and asset quality remained largely stable.
The company maintained a tight leash on its operating expenses. SCUF's opex to assets ratio remains on the higher side and hence it offers scope for improvement going forward. Although the asset quality remained largely stable qoq, the company is yet to migrate to 150-dpd NPL recognition method. The management has guided that the company would migrate to 150-dpd NPL recognition by the year-end."
Commenting on the investment rationale, the stock broker said, ''We expect SCUF's growth momentum to improve further as two-wheeler sales pick up and demand from SME segment picks up in tandem with the economic activity. With uncertainty over the gold loan business behind it and its strong capital position, SCUF remains well poised for its next phase of growth. ROEs to improve gradually as leverage increases. ROAs likely to remain healthy despite elevated credit costs. We maintain our estimates and Accumulate rating on the stock.''
