Morgan Stanley has maintained its overweight rating on Shriram Finance with a target price of ₹785 per share after the lender delivered an 8% PAT beat relative to its estimates in Q2FY26, primarily on account of lower-than-expected credit costs.
The brokerage said credit costs stood at 1.93% — down 14 basis points year-on-year and marginally higher by 1 basis point sequentially — against its expectation of 2.3%. This, along with steady pre-provision operating profit (PPOP) and lower opex, helped offset a minor miss in net interest income (down 1% vs estimate).
Morgan Stanley said stressed asset formation has declined sharply to 1.1% of trailing 12-month AUM (annualised), compared to 4.4% in Q1FY26 and 2.7% in Q2FY25. Stage 2+3 assets fell to 11.5% from 11.9% sequentially, with total provision cover on Stage 3 loans improving to 127%.
The brokerage said Shriram’s asset quality trends are improving and cost discipline remains solid, supporting confidence in its medium-term return profile.
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