Target: ₹2,130

CMP: ₹1,891.85

Shriram Finance (SFL) reported a strong AUM growth of INR 1.93trn (+4 per cent QoQ) led by healthy disbursements of ₹30500 crore(+21 per cent YoY, -1.9 per cent QoQ). NII came in at ₹4,440 crore (flat QoQ, +5 per cent JMF expectaions) even as NIMs declined by -23bps QoQ at 8.3 per cent primarily due to healthy loan growth.

PPoP stood at ₹3,130 crore (+1.5 per cent QoQ) led by -4 per cent QoQ decline in opex. Lower credit costs of ₹880 crore (1.9 per cent of AUM vs 2.6 per cent QoQ) led to healthy PAT of ₹1,680 crore (+28 per cent QoQ). Asset quality improved sequentially with Gross stage 3/ Net stage 3 at 6.03 per cent/2.96 per cent by -17bps/-23bps QoQ respectively. PCR on stage.3 improved +240bps QoQ at 52.5 per cent.

Mgmt. remains confident on sustaining growth, though will revisit guidance post Q2-FY24. Despite the recent rally in the stock, we believe the valuations still remain favourable basis its enhanced presence across pan-India and diversified portfolio mix postmerger. The stock trades at 8.2x P/E and 1.2x P/BV on FY25e. We value SFL at 1.4x/9.6x FY25 P/BV and P/E and maintain BUY with a revised TP of ₹2,130. Previous target price was ₹1,875.