The year 2021 has delivered a huge number of multibagger stocks. Shares of Shriram City Union Finance have more than doubled investors' money so far in 2021. In comparison, the Nifty 50 index gained over 24 percent and the S&P BSE Sensex index rose over 22 percent.
This multibagger stock has surged from Rs 1,081 to Rs 2,549.30 mark. It has gained 136 per cent since the beginning of this year and risen 170 per cent in the last one year.
The stock rose 7 per cent to hit a fresh 52-week high of Rs 2,549.30 on BSE. It has been gaining for the last 2 days and has delivered 17 per cent return in the last one month.
The Chennai-based non-banking finance company reported a net profit of Rs 218.35 crore for the quarter ended June 2021 compared to a profit of Rs 197.07 crore in the year-ago period. Revenue from operations grew 9 per cent to Rs 1,610.97 crore in the June-ended quarter against Rs 1,482.78 crore a year ago.
Recently, the lender's managing director and CEO Y S Chakravarti said July 2021 was better than June with disbursements crossing Rs 3,000 crore. Even the collection efficiency had touched closed to 100 per cent in July compared to 93 per cent in June.
Chakravarti said the company is seeing good demand from SME and gold loan segments and will continue to focus on growing the book there.
According to MarketsMojo, the company has strong long-term fundamental strength with an average Return on Equity (ROE) of 14.30%. The technical trend has improved from Mildly Bullish on August 13, 2021, and has generated 17.04% returns since then. The stock is technically in a Bullish range and multiple factors for the stock are Bullish like MACD, Bollinger Band, KST and OBV.
Also, the stock is trading at a fair value compared to its average historical valuations and with ROE of 12.7, it has a Attractive valuation with a 1.9 Price to Book Value. The company has high institutional holdings at 32.07% as well.
"While we expect AUM growth to remain muted at 7% in FY22E, we build in a 12% CAGR in AUM over FY21-24E. We cut our FY22E PAT estimates by 10%, factoring in higher credit costs. Given the visibility around likely loan growth/credit costs, we model in RoA/RoE of 3.6%/14% in FY23E," said Motilal Oswal.
The brokerage house noted that the loan book growth was muted given the impact on disbursements (from lockdowns). However, the liability-side and liquidity issues faced by the company immediately after the pandemic outbreak have now receded into the sidelines.
"Despite its presence in vulnerable product segments such as MSME, 2W, and Personal Loans, asset quality performance has been encouraging, with minimal restructuring. With equity infusion of Rs 200 crore from the parent, Shriram Housing would look forward to strong growth and carving out its niche in the Affordable Housing Finance segment," it added.
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