Buy Shriram Finance; target of Rs 2700: Motilal Oswal

Motilal Oswal is bullish on Shriram Finance recommended buy rating on the stock with a target price of Rs 2700 in its research report dated January 27, 2024.

Broker Research

January 30, 2024 / 22:39 IST

Buy

26 Aug, 2025 12:21

Volume

Todays L/H

Motilal Oswal's research report on Shriram Finance

Shriram Finance (SHFL)’s 3Q PAT grew 2% YoY to ~INR18.2b (in line), while 9MFY24 PAT rose ~12% YoY. PPoP was up 12% YoY to ~INR36.9b (in line). NII grew ~17% YOY to INR49.1b (inline). The reported NIM expanded ~5bp QoQ to ~9%, aided by a higher-yielding product mix. Credit cost of INR12.5b (7% higher than MOSLe) translated into an annualized credit cost of ~2.4% (PQ: 2.3% and PY: 2.1%) led by an increase in PCR on S1/S2 loans. Management shared that it does not expect a further rise in its CoB and the higher-yielding products such as PL, 2W, and Gold will continue to grow faster than the CV segment. We model NIMs (on AUM) of 9.2%/9.0%/9.3% for FY24E/FY25E/FY26E. Higher cross-selling opportunities for non-vehicle products and improved distribution of investment and insurance offerings should translate into an AUM and PAT CAGR of ~18% each over FY23-26.

Outlook

This will translate into an RoA/RoE of ~3.2%/~17% in FY26. As a merged entity, SHFL has positioned itself to capitalize on: 1) the diversified AUM mix; 2) improved access to liabilities; and 3) the enhanced cross-selling opportunities. Reiterate BUY with a TP of INR2,700 (premised on 1.6x FY26E BVPS).

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