Buy Shriram Finance; target of Rs 860: Motilal Oswal

BUY

Motilal Oswal's research report on Shriram Finance

Shriram Finance’s (SHFL) 2QFY26 PAT rose ~11% YoY to ~INR23b (~5% beat). PAT in 1HFY26 grew 10% YoY, and we expect PAT in 2HFY26 to grow 24% YoY. NII in 2QFY26 grew ~10% YoY to INR60.3b (in line). Credit costs stood at ~INR13.3b (~11% lower than est.) and translated into annualized credit costs of ~1.9% (PQ: 1.9% and PY: 2.1%). PPoP grew ~11% YoY to ~INR44.4b (in line). Other income grew ~57% YoY to INR3.6b (PQ: INR3.7b and PY: INR2.8b). The cost-to-income ratio stood at 30.5% (PY: 30.6% and PQ: 31.7%), and the opex was broadly flat sequentially. This was due to branch consolidation and a reduction in employee count as the company focused on improving both branch and employee productivity as well as operating efficiencies.

Outlook

The current valuation of ~1.9x FY27E P/BV is attractive for ~18% PAT CAGR over FY25-28E and RoA/RoE of ~3.4%/ 17% in FY28E. Reiterate BUY with a TP of INR860 (based on 2x Sep’27E BVPS).

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Shriram Finance_03112025_Motilal Oswal