Buy Shriram Finance; target of Rs 2950: Motilal Oswal

Motilal Oswal's research report on Shriram Finance

Shriram Finance’s (SHFL) 4QFY24 PAT grew ~49% YoY to ~INR19.5b (in line) and PPoP grew 27% YoY to ~INR39.1b (in line). FY24 PAT grew ~20% YoY to ~INR71.9b. YoY numbers may not be comparable because of a few one-off items in 4QFY23.4Q NII grew 22% YoY to INR50.9b (in line). Reported NIM rose ~3bp QoQ to ~9%, aided by improvement in product mix and only a ~5bp QoQ increase in CoB. Credit costs at INR12.6b (in line) translated into annualized credit costs of ~2.3% (3QFY24: 2.4% and 4QFY23: 2.6%).The management shared that it does not expect a further rise in CoB and that higher-yielding products such as PL, 2W, and Gold will continue to grow faster than the CV segment. We model NIMs (on AUM) of 9.1%/9.3% for FY25E/FY26E.

Outlook

The potential monetization of its stake in Shriram Housing can further unlock optionality value, improve its capital adequacy, and help it engage constructively with credit rating agencies. Reiterate BUY with a TP of INR2,950 (premised on 1.7x FY26E BVPS).