Buy SBFC Finance; target of Rs 125: ICICI Securities

ICICI Securities research report on SBFC Finance

Q4FY25 marks eight straight quarters of strong financial performance and effective execution at SBFC Finance (SBFC). This is evident in its AUM growth outshining the guided range of 5–7% QoQ, better opex to AUM at 4.65% in FY25 vs. 5.34% in FY24, and credit cost at 80–100bps as envisaged earlier, despite the operating environment being mired in tight liquidity, higher delinquencies in unsecured loans and the rising rate cycle. With Q4FY25 RoE at ~12%, up ~200bps since Q4FY23, SBFC remains on track to achieve ~15% RoE by Q4FY26. While asset quality is stable with GNPL at 2.74% vs. 2.7% QoQ, increase in 1+ DPD to ~7% in Q4FY25 vs. 6.5% in Q3FY25 vs. 5.6% in Q4FY24 raises concern over near-term asset quality. However, management sounds confident of maintaining credit cost at 80–100bps ahead.

Outlook

Thus, we retain BUY, with a revised TP of INR 125 (vs. INR 115), as we roll over to Sep’26E BVPS, valuing the stock at 3.5x vs. 4x Sep’25E BVPS.