Shares of Shriram Finance rise on Jefferies’ Buy call over promising growth prospects

Shares increased by 1% after Jefferies issued a 'Buy' recommendation with a target price of Rs 710 per share. Jefferies is optimistic about the company's prospects, particularly in the used passenger vehicle and non-auto segments, which should help Shriram Finance sustain a 17% CAGR in assets under management (AUM) from FY25 to FY27, offsetting challenges in the commercial vehicle market.

Shares of Shriram Finance gained about a percent on February 25 after Jefferies recommended a 'Buy' on the shares with a target price of Rs 710/share.

The shares are trading at Rs 579.45 as of 11:50 am with a gain of 0.39 percent.

Shriram Finance has seen a 20 percent fall in its stock performance from the recent peak on concerns over sluggish commercial vehicle (CV) sales and rising asset quality risks. The increase in freight rates since December has provided some support for the business.

Jefferies is optimistic about the company’s growth prospects, particularly in the used passenger vehicle (PV) and non-auto segments, which should help drive a 17 percent compound annual growth rate (CAGR) in assets under management (AUM) over FY25-27. This growth is expected to offset some of the pressures from the weak CV market.

Shriram Finance's asset quality has remained strong, and the company is not expected to see a sharp rise in gross non-performing assets (GNPA). In terms of earnings, the company has faced fewer EPS downgrades compared to peers. At a valuation of 1.6 times FY26 book value, Jefferies finds the shares attractively priced, presenting longer term investment potential.

The company, in its quarter-ended December 2024 earnings, reported a net profit of Rs 2,080 crore, reflecting a 14.4 percent on-year growth, excluding a one-time gain seen in the quarter ago period. Shriram Finance’s net interest income (NII) rose by 14.3 percent to reach Rs 5,823 crore during the quarter.