Shriram Finance shares record new all-time high after Q2 earnings

In its quarterly report released on Thursday, the NBFC reported a consolidated net profit of ₹1,792 crore, marking a 13% increase compared to ₹1,578.56 crore in Q2 FY23.

The company’s net interest income in Q2 FY24 came in at ₹4,969.39 crore, a growth of 18.80% YoY, driven by strong loan growth, while the net interest margin expanded to 8.9% in Q2 FY24, reflecting a 67-basis point increase year-on-year.

Its total assets under management during the quarter increased by 19.65% to reach ₹202,640.96 crore as compared to ₹169,359.08 crore reported in Q2 FY23 and ₹193,214.67 crore in Q1 FY24.

Shriram Finance is a leading financial institution primarily focused on providing financing solutions for various sectors. The company specialises in offering financial services for commercial vehicles, passenger vehicles, construction equipment, farm equipment, micro, small, and medium enterprises (MSMEs), two-wheelers, as well as gold and personal loans.

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In response to the company’s stellar performance, domestic brokerage firms maintained their ‘buy’ ratings on the stock.

Centrum Broking: Maintains a ‘Buy’ rating with a Target Price of ₹2,400

Brokerage firm Centrum Broking maintained its ‘buy’ rating on the stock with an unchanged target price of ₹2,400 apiece, which indicates an upside of 22.5% from its current market price.

The brokerage highlighted that the growth in net interest margin (NIM) was driven by several factors, including a shift in the product mix towards higher-yield offerings, the reduction of excess liquidity, and a slight decrease in the cost of funds (CoF).

Motilal Oswal: Retains ‘Buy’ call with a Target price of ₹2,325

Motilal Oswal, another brokerage firm, believes that Shriram Finance can sustain or even enhance its net interest margin (NIM) trajectory while maintaining relatively manageable credit costs.

The brokerage noted that Shriram Finance has yet to fully maximise its distribution network’s potential for products such as MSME and gold loans. As Shriram Finance continues to explore these opportunities over the next year, the asset under management (AUM) growth for MSME, personal loans (PL), and gold loans is expected to remain robust, it added. 

With its expanded geographical presence and a larger workforce, Shriram Finance can capitalise on cross-selling prospects to reach new customers and introduce new products, establishing a strong foundation for sustained growth, it highlighted.

Kotak Institutional Equities: Maintains a ‘Buy’ call with a Target Price of ₹2,300

“Shriram remains our favored vehicle finance NBFC, trading at a significant discount to peers. It is gradually reducing the gap with peers on loan growth (Chola and MMFS growing at 27–40%), with expanding margins (while others suffer due to the shifting product mix and rise in the cost of funds and refinancing of lower-yield bonds),” said Kotak.

Furthermore, the brokerage pointed out that the company’s stressed loans, which had shown improvement shortly after the Covid-19 pandemic, have not only maintained their stability but have been consistently improving.

“Shriram Finance reported one of the best quarters with 20% loan growth after four years. High growth in SCUF’s business, coupled with higher passenger vehicle sales, were the key drivers. Most NBFCs have been sluggish in raising lending rates, but the product mix change put Shriram in a better position versus peers. This reflects the benefit of diversification due to the merger,” said the brokerage. 

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.

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Updated: 27 Oct 2023, 12:39 PM IST