Shriram Finance shares gain after Motilal Oswal's 'Buy' rating at Rs 700 target price

Shriram Finance shares gain with Motilal Oswal's "Buy" recommendation at target price Rs 700

Shriram Finance shares jumped 1.24 percent to trade at around Rs 538.60 on January 13 after Motilal Oswal issued its latest outlook on the stock. The brokerage firm has maintained its "Buy" rating on the stock, with a target price of Rs 700.

Follow for live updates

The latest target price set by Motilal Oswal implies a potential upside of nearly 32 percent from the current market price. The PAT CAGR projection stood at approximately 19 percent over FY24-27E and RoA/RoE is expected to reach 3.3 percent to 17 percent by FY27E.

The brokerage firm said the company's asset quality is quite stable, with credit costs anticipated to stay between 2.3 to 2.4 percent over FY26-27E.

It further added that a significant boost in its estimates for the stock can be attributed to the sale of Shriram Finance’s housing finance subsidiary to Warburg Pincus for around Rs 3,929 crore, resulting in a post-tax exceptional gain of nearly Rs 1,300 crore. The company is poised to benefit from expected repo rate cuts and a strategic shift towards high-yielding non-CV products.

The merger with Shriram City Union Finance has significantly strengthened SHFL’s position in non-commercial vehicle (CV) loans, with notable contributions from gold loans, MSME loans, and personal loans. The company’s commitment to green financing and expansion in the electric vehicle (EV) portfolio is also highlighted as a key growth area.  "Even if there is a downtrend in auto in the future, we expect non-auto products to emerge as a growth driver for SHFL. We model AUM CAGR of ~16 percent in CV and ~23 percent in non-CV product segments over FY24-27E. This will translate into a total AUM CAGR of ~18 percent over this period", says the report.