Shriram Finance (SFL)’ is the flagship company of the Shriram Group.
Posted: Fri Dec 20, 2024 9:11 pm
Shriram Finance has delivered strong AUM growth of ~20% CAGR over 2 years post-merger, while improving asset quality. SFL has the ability to continue its growth trajectory and deliver a strong 17/17/19% CAGR AUM/NII/Earnings growth. Buy for TP ₹3825 (30%)
"We initiate coverage on Shriram Finance Ltd (SFL) with a BUY recommendation and a target price of Rs 3,825/share, implying an upside of 30% from the CMP. Born out of the merger of Shriram Transport Finance (SHTF), a pioneer in used CV financing and Shriram City Union Finance (SCUF), a diversified retail-focused NBFC – ‘Shriram Finance (SFL)’ is the flagship company of the Shriram Group. The company provides lending services from its diversified product suite. It has been able to deliver strong AUM growth of ~20% CAGR over the 2 years post-merger, while continuously improving asset quality. We remain confident in SFL’s ability to continue its growth trajectory and expect a strong 17/17/19% CAGR AUM/NII/Earnings growth over FY24-27E, driven by (i) Healthy growth primarily in the non-vehicle segment, (ii) Stable NIMs supported by a diversified borrowing franchise and a favourable mix of better-yielding segments, (iii) Gradually declining Opex ratios driven by improving productivity, and (iv) Steady to marginally better credit costs. We expect RoA/RoE delivery to remain healthy at 3.2-3.3%/16-17% over FY25-27E.
We initiate coverage on Shriram Finance (SFL) with a BUY recommendation. This is supported by a) Potential to improve market share in the used-CV segment, b) Reduced cyclicity with lower dependence on the CV portfolio, c) Diversification of portfolio ensuring healthy AUM growth, d) Steady Asset Quality with lower mix of unsecured loans and e) Potential to deliver healthy return ratios. We value the stock at 2.2x FY27E ABV (vs. its current valuations of 1.7x FY27E ABV) and arrive at a target price of Rs 3,825/share, implying an upside of 30% from the CMP."
"We initiate coverage on Shriram Finance Ltd (SFL) with a BUY recommendation and a target price of Rs 3,825/share, implying an upside of 30% from the CMP. Born out of the merger of Shriram Transport Finance (SHTF), a pioneer in used CV financing and Shriram City Union Finance (SCUF), a diversified retail-focused NBFC – ‘Shriram Finance (SFL)’ is the flagship company of the Shriram Group. The company provides lending services from its diversified product suite. It has been able to deliver strong AUM growth of ~20% CAGR over the 2 years post-merger, while continuously improving asset quality. We remain confident in SFL’s ability to continue its growth trajectory and expect a strong 17/17/19% CAGR AUM/NII/Earnings growth over FY24-27E, driven by (i) Healthy growth primarily in the non-vehicle segment, (ii) Stable NIMs supported by a diversified borrowing franchise and a favourable mix of better-yielding segments, (iii) Gradually declining Opex ratios driven by improving productivity, and (iv) Steady to marginally better credit costs. We expect RoA/RoE delivery to remain healthy at 3.2-3.3%/16-17% over FY25-27E.
We initiate coverage on Shriram Finance (SFL) with a BUY recommendation. This is supported by a) Potential to improve market share in the used-CV segment, b) Reduced cyclicity with lower dependence on the CV portfolio, c) Diversification of portfolio ensuring healthy AUM growth, d) Steady Asset Quality with lower mix of unsecured loans and e) Potential to deliver healthy return ratios. We value the stock at 2.2x FY27E ABV (vs. its current valuations of 1.7x FY27E ABV) and arrive at a target price of Rs 3,825/share, implying an upside of 30% from the CMP."