Among them were HSBC, Motilal Oswal and Nuvama who remained gung-ho on the prospects of the stock and recommended a buy after the company posted strong September quarter earnings on Thursday.
The stock nearly touched its 52-week high of Rs 1,971.80.
Shriram Finance’s net profit increased 13% year-on-year to Rs 1,751 crore in the quarter ended September driven by strong demand for vehicle loans.
Besides, net interest margin (NIM) improved during the quarter as the company reduced the excess liquidity on its books. Commercial vehicle loan disbursements increased 14%, construction equipment 22%, and micro medium and small enterprises (MSMEs) increased 30% year-on-year.
The company’s NIM, which is the difference between the yield it earns on loans and that it pays for funds, improved to 8.93% from 8.26% a year ago despite an increase in finance costs which rose 12% to Rs 3,622 crore from Rs 3,234 crore a year ago.
Here is what brokerages recommended:HSBC: Buy | Target: Rs 2,300
HSBC has a buy view on Shriram Finance and the brokerage has revised its price target upward to Rs 2,300 from an earlier target of Rs 2,260.
The company posted strong Q2 earnings with an enhanced guidance raising the appeal of the stock, HSBC said in a post earnings review of the stock.
The management has upgraded the loan growth guidance to 18-20% from 15% for FY24 and NIM guidance to 8.5-9.0% from 8.5%. The asset quality has improved, expanding its growth appetite, HSBC said, adding that the incremental cost of funds is lower than the outstanding cost of funds.
Motilal Oswal: Buy | Target: Rs 2,325
Motilal Oswal has reiterated a buy view on the counter for a price target of Rs 2,325 based on 1.5X September 25E BVPS. The current valuation of 1.1X September 25E BVPS is attractive for a 19% PAT CAGR over FY23-26E and RoA/RoE of 3.3%/17% in FY26E, the brokerage said in a note.
“SHFL should be able to sustain or improve upon its NIM trajectory, along with relatively benign credit costs. The company is yet to fully exploit its distribution network for products like MSME and gold loans. As SHFL continues to do so over the next one year, the AUM growth of MSME, PL, and Gold Loans is expected to remain robust,” the note said.
Nuvama: Buy | Target: 3,505
Nuvama retained the target price at Rs 2,145 as it maintained a buy rating on Shriram Finance stock, valuing it at 1.4X BV FY25E.
The company delivered a strong outperformance of 6% on NII and 8% on PPOP in Q2FY24 driven by higher NIM. PAT grew in line with Nuvama’s estimates due to higher credit cost.
(You can now subscribe to our ETMarkets WhatsApp channel)
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)