On Monday, JPMorgan analysts updated their outlook on Shriram Finance (SHFL:IN), raising the price target from Rs 3,200 to Rs 3,500. The company continues to maintain an “overweight” rating on the stock. This revision follows Shriram Finance’s second-quarter results, which are in line with both JPMorgan and consensus estimates.
The company reported profit after tax (PAT) for the second quarter at Rs 20.7 billion, up 18% year-on-year. This growth was supported by a 16% increase in net interest income (NII) and a 15% increase in pre-provision operating profit (PPOP). Additionally, Shriram Finance’s assets under management (AUM) grew by 20% year-on-year.
Shriram Finance’s net interest margin (NIM) also showed improvement, increasing by 7 basis points quarter-on-quarter. The company experienced strong asset quality performance, with total Stage 2+3 assets decreasing 12 basis points sequentially. This trend is notable as it contrasts with its peers, which have seen a decline in asset quality. Shriram Finance’s net slippage rate and cost of credit remained stable.
Return on assets (ROA) and return on equity (ROE) remain strong at 3.5% and 16%, respectively, and are likely to improve further in a better-than-usual second half. The company has healthy capital adequacy ratios, with Tier 1 capital at 19.4%. This ratio is expected to increase further due to the sale of the housing subsidiary.
The analyst believes the company’s strong asset growth, capital security, healthy returns, and stable asset quality trends support a trading multiple of 11x compared to its current price-to-earnings ratio of 11x. He emphasized this as a factor supporting the improvement. The forecast price/book ratio (P/B) for FY2026 is 1.8 times the forecast for FY2026. Year-to-date performance has already outperformed the Nifty index by 40%, and analysts expect the outperformance to continue, reaffirming Shriram Finance as one of the key overweight positions. .
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