YES Securities' research report on Shriram Finance
Shriram Finance’s reported PAT was 30% below our expectations, caused by lower NII (5% miss), higher opex and higher provisions. The NII miss came despite stronger-than expected AUM growth (up 4.6% qoq/16% yoy) and further reduction in balance sheet liquidity. Higher opex was essentially due to amortization (Rs3bn annual impact taken in one quarter) of the intangibles balance (except Goodwill) created from the merger. Credit cost was higher due to additional Rs2.95bn provisions made in the quarter due to one-off stress testing exercise. Even besides this, the regular credit cost was slightly higher considering the larger utilization of Covid provision buffer.
Outlook
Valuation is undemanding at 1.1x P/ABV and 7x P/E on FY25 estimates and could re-rate on sustenance of current AUM growth rate and improvement in asset quality. Retain BUY with 12m PT of Rs1700.
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