Shriram Finance soars to new 52-week high as most brokerages remain optimistic after strong Q3 show

Shriram Finance share price: Shares of Shriram Finance rallied over 6 per cent to hit a fresh 52-week high of Rs 2,448.85 apiece in Monday’s trade (January 29, 2024) after posting strong financial results for the December-ended quarter (Q3 FY24).

For the quarter under review, consolidated net profit at the company inched higher by 3.99 per cent year-on-year (YoY) to Rs 1,873.59 crore versus Rs 1,801.66 crore recorded in the same period of the previous year. Besides, net interest income (NII) rose by 16.93 per cent and came in at Rs 5,274.91 crore as against Rs. 4,511.35 crore logged in the same period of the previous year.

Consolidated earnings per share (basic) increased by 2.96 per cent and stood at Rs. 49.70 as compared to Rs. 48.27 recorded in the same period of the previous year.

Total assets under management (AUM) as of December 31, 2023, increased by 20.70 per cent and stood at Rs. 214,233.47 crore as compared to Rs 177,498.02 crore as of December 31, 2022 and Rs 202,640.96 crore as of September 30, 2023.

The asset quality at the firm also logged an improvement, with gross non-performing assets reducing to 5.66 per cent as against 5.79 per cent in the preceding September-ended quarter.

At 10:43 am, shares of the NBFC company were up 3.2 per cent to Rs 2,380 per share.

What do brokerages suggest for Shriram Finance post-Q3 FY24?

Global brokerage HSBC, while maintaining a ‘buy’ rating on the counter, increased the stock’s target price to Rs 2,720 from Rs 2,630. The brokerage held that the asset-financing NBFC missed its estimates by 5.5 per cent on the back of high credit costs. Though operating performance came in line with the estimates, HSBC tweaked its FY24e/25e/26e EPS to -2.1%/+3.4%/+2.1%, reflecting higher credit costs and slightly stronger NIM estimates.

Citi also retained its ‘buy’ call on the counter with a target of Rs 2,670. The brokerage is of the view that the company’s Q3 PAT came in marginally lower. Further, it added that NIM expansion by 6 bps sequentially to 8.9 per cent came in as a positive surprise. This was offset by write-offs (Rs 725 crore) and expected credit loss (ECL) provisions (Rs 520 crore), leading to elevated credit costs at 2.4 per cent, which was above management guidance of 2.0 per cent.

Shares of Shriram Finance have delivered a decent 91 per cent return in the past 12 months.

Shriram Finance, with a market capitalisation of Rs 89,544 crore, is a large-cap company. The company is primarily engaged in the business of financing commercial vehicles, while it also provides loans for equipment and other business purposes.