Driven by its strong Q2FY24 performance, non-banking financial company (NBFC) Shriram Finance saw a notable 12.9% increase in its stock price, reaching a new all-time high of ₹2,029.7 per share during Friday’s trading session.
The NBFC reported a consolidated net profit of ₹1,792 crore in its quarterly report, which was made public on Thursday. This represents a 13% increase from ₹1,578.56 crore in Q2 FY23.
Due to robust loan growth, the company’s net interest income in Q2 FY24 increased to ₹4,969.39 crore, or 18.80% YoY. Meanwhile, the net interest margin increased to 8.9% in Q2 FY24, or 67 basis points, year over year.
During the quarter, its total assets under management increased by 19.65% to ₹202,640.96 crore, from ₹169,359.08 crore in Q2 FY23 and ₹193,214.67 crore in Q1 FY24.
Leading financial company Shriram Finance specializes in financing solutions for different industries. The company specializes in providing financial services for two-wheelers, commercial and passenger vehicles, gold and personal loans, construction and farm equipment, and micro, small, and medium-sized enterprises (MSMEs).
Due to the company’s outstanding performance, domestic brokerage firms kept their stock ratings of “buy.”
Centrum Broking: Holds onto its ‘Buy’ rating with a ₹2,400 target price.
With a target price of ₹2,400 per share, the brokerage firm Centrum Broking kept its ‘buy’ rating on the stock, indicating a 22.5% increase from the current market price.
The brokerage emphasized that a number of factors, such as a change in the product mix toward higher-yield offerings, the elimination of excess liquidity, and a minor drop in the cost of funds (CoF), were responsible for the growth in net interest margin (NIM).
Motilal Oswal: Maintains the ‘Buy’ recommendation with a ₹2,325 target price.
Another brokerage firm, Motilal Oswal, thinks that Shriram Finance can continue to grow or even improve its net interest margin (NIM) trajectory while keeping credit costs reasonably controlled.
The brokerage observed that the potential of Shriram Finance’s distribution network for products like MSME and gold loans has not yet been fully realized. It further stated that the asset under management (AUM) growth for MSME, personal loans (PL).
Shriram Finance noted that it can take advantage of cross-selling opportunities to reach new customers and introduce new products, building a solid foundation for long-term growth, thanks to its expanded geographic reach and a larger workforce.
Kotak Institutional Equities: Retains its ‘Buy’ recommendation with a ₹2,300 target price.
Given its substantial price discount to its competitors, Shriram is still our preferred vehicle finance NBFC. Though others suffer from a changing product mix, rising funding costs, and refinancing of lower-yield bonds, it is steadily closing the margin gap with peers on loan growth (Chola and MMFS growing at 27–40%), Kotak said.
Also, the brokerage emphasized that the company’s stressed loans have not only maintained their stability but have been steadily improving, in contrast to how they had appeared shortly after the COVID-19 pandemic.
With 20% loan growth after four years, Shriram Finance posted one of its best quarters. The main forces were the rapid expansion of SCUF’s business and increased sales of passenger cars.
