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IDBI Capital Report
Shriram Finance Ltd.'s net interest margin improved to 8.99 % QoQ led by led by rise in yields. Management guided to hold NIMs at 8.9% (versus 8.5% - 8.9% earlier) going forward. Assets under management growth remains strong led by growth in passenger vehicle and micro, small and medium enterprise segments.
Management guided for 20% AUM growth for FY24 and conservatively 15% growth going forward. We expect 16% CAGR (FY23-26) loan growth. Asset quality improved with gross stage-III at 5.7% versus 5.8% led by higher write offs.
Net interest income grew by 7% QoQ led by improvement in NIMs; pre-provision operating profit grew by 6% QoQ led by lower other income (down 11% QoQ).
However, PAT grew by 4% QoQ led by increase in provisions (up 11% QoQ). We have moved to FY26E estimates and expect earnings per share to grow at 13% CAGR (FY23-26).
We maintain 'Buy' rating on Shriram Finance with new target price of Rs 2,675 (earlier Rs 2,230) valuing at 1.75 times FY26E adjusted book value.
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