Goldman Sachs expects Shriram Finance Ltd. to outperform Mahindra & Mahindra Financial Services Ltd. in return metrics, noting recent outperformance of Indian retail non-banking financial company stocks over consumer retail NBFCs.
According to a note from May 9, the brokerage predicts that Shriram Finance will significantly surpass M&M Finance in terms of return on assets and loan-to-earnings per share growth, expecting a 300 bps higher CAGR over FY24-FY26. The brokerage maintains a 'buy' rating on Shriram Finance.
The research firm expects Shriram Finance to achieve a 23% EPS CAGR over FY24–26E based on improving ROAs, stable credit costs, and operating leverage.
Goldman reduced Mahindra & Mahindra Financial Services' target price by 13% to Rs 233 per share, while maintaining Shriram Finance's target price at Rs 2,864 per share.
Goldman Sachs On M&M Finance
Downgrades to 'sell' citing elevated credit costs given, higher cost-to-income ratio and moderating loan growth .
Cuts earnings for MMFS by 9%/7% on account of mainly higher operating expenses.
Given the lower confidence on growth, ROA and risk framework, the stock would likely de-rate further.
Goldman Sachs On Shriram Finance
Post its merger with erstwhile SCUF, Shriram has emerged stronger with better profitability and visibility on loan growth.
Expects the company to deliver 23% EPS CAGR over FY24-26E with improving ROAs.
Expects the stock to continue to see re-rating.
Shares of Shriram Finance was trading 1.1% higher at Rs 2,384 per share, while those of Mahindra & Mahindra Financial Services were trading 0.38% lower at Rs 252 apiece. This is compared to a 0.31% advance in the benchmark Nifty 50 as of 10:55 a.m.
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