Shriram Finance - Growth, Asset Quality In Good Shape: Yes Securities

Yes Securities Report

Shriram Finance Company Ltd. is a multi-product/diversified lending franchise with synergistic growth at disposal. The company has demonstrated strong and consistent execution on growth and asset quality fronts throughout H2 FY23 and FY24.

It has sustained net interest margin in a narrow band in recent quarters notwithstanding the pressure on funding cost. Further assets under management mix shift towards relatively higher yielding products (micro, small and medium enterprise, gold loans and two-wheelers) is likely to support stable margin delivery in ensuing quarters.

We expect 16% AUM CAGR and 20% earnings CAGR over FY24-26 with average return on asset/return on equity delivery of 3.4%/17%. Despite recent rally, stock’s valuation (1.9 times price/adjusted book value and 10.3 times price/earnings on FY26 estimates) is palatable in the context of envisaged growth/RoE delivery.

Shriram Finance remains our preferred pick in vehicle finance coverage. We reiterate Buy with 12 months target price of Rs 3420.

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