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Nirmal Bang Report
Shriram Finance Ltd.’s Q4 FY24 performance was merely flat versus our estimates, with net interest income/pre-provision operating profit coming in at a variation of 1.1%/-3.5%. Profit after tax came in at Rs 19.45 billio (versus our estimate of Rs 24.5 billion) on account of higher than expected provisions (+6.5% YoY).
AUM grew robustly at 21% YoY to Rs 2,249 billion, led by robust growth in the Shriram City Union Finance Ltd. portfolio. We expect Shriram Finance to deliver 17.5% return on equity in FY25, led by steady growth in assets under management, sustainable NIM and controlled credit costs.
Strong growth outlook in Shriram City Union Finance portfolio, stable NIM and improving asset quality ratios are key positives.
We tweak our estimates factoring in higher opex. Roll forward our valuation to March 2026E adjusted book value of Rs 1,614, with no change in target multiple of 1.7 times, giving us a target price of Rs 2,675 (same as earlier).
The stock has rallied 8% over the past three months and valuation prices in all the positives. Downgrade to Accumulate.
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