InCred Equities has maintained an ‘Add’ rating on Shriram Finance Limited with a target price of ₹4,250/share, reflecting an upside potential of 43% from the current levels.
Key Highlights:
- Positioning Amid Slowdown: Shriram Finance is well-positioned to navigate the slowdown in vehicle finance compared to its peers, showcasing resilience in its core business.
- Interest Rate Scenario: The declining interest rate environment is expected to benefit the company, bolstering its growth prospects.
- NIM Improvement: Net Interest Margin (NIM) is projected to improve by FY26, supported by:
- Strong Asset Under Management (AUM) growth.
- Falling interest rates.
- Enhanced system liquidity.
- Asset Quality Comfort: Improvements in the non-vehicle loan book’s asset quality trends provide confidence in the company’s stability.
- Valuation Metrics: The stock is currently valued at 2.6 times its Book Value (BV) for FY26, reflecting an attractive risk-reward ratio.
Downside Risks:
- Slower-than-expected growth.
- A spike in fresh loan slippage could pose challenges to asset quality.
InCred Equities views Shriram Finance’s strategic focus on diversified growth, along with favorable macroeconomic conditions, as key drivers for its positive outlook.
Disclaimer: The above analysis is based on inputs provided and is for informational purposes only. It does not constitute financial advice. Readers are advised to consult their financial advisors before making any investment decisions.
