Shriram Finance shares slide nearly 3% after Q3 results. Should you invest?

Shriram Finance shares slipped 2.6% to their day’s low of Rs 513.50 on the BSE even as the firm reported a 73% increase in consolidated net profit to Rs 3,249 crore for the third quarter ended December 2024, up from Rs 1,874 crore in the same quarter last year.

Total income for the quarter rose to Rs 10,705 crore, compared to Rs 8,927 crore a year ago. Net interest income increased by 14.3% to Rs 5,823 crore, up from Rs 5,094 crore in Q3 FY24.

Assets under management (AUM) rose to Rs 2,54,469.69 crore, compared to Rs 2,14,233.47 crore as of December 31, 2023.


On the asset quality front, the gross non-performing assets (NPAs) declined to 5.38% of gross loans from 5.66% a year ago. Similarly, net NPAs eased to 2.68%, down from 2.72% in the third quarter of the previous fiscal.

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Should you buy, sell, or hold Shriram Finance's stock? Here's what analysts say:

HSBC

Following a solid quarter, HSBC maintained a 'Buy' rating on Shriram Finance with a target price of Rs 745.

Key highlights include healthy growth, expansion in lending spreads, and contained asset quality, along with stable credit costs. The management also noted an improvement in the demand environment for commercial vehicles (CVs), with stable resale prices.

However, HSBC slightly revised down its FY25/27 earnings per share (EPS) estimates by 1.6% to 2.5%, factoring in higher operating costs due to increased spending on branding and promotions. Additionally, AUM estimates have been marginally cut, considering lower growth in vehicle sales for FY25.

Jefferies

Jefferies maintained a 'Buy' rating on Shriram Finance, with a revised target price of Rs 710, down from Rs 734.

The stock remains one of their top picks, despite a slight miss on profit due to lower net interest income (NII) and higher provisions. A net interest margin (NIM) fall was driven by excess balance sheet liquidity, which may take a few quarters to absorb.

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Jefferies expects the asset under management (AUM) compound annual growth rate (CAGR) to remain strong at 17% over FY25/27. The company's gross non-performing asset (GNPA) ratio is better than that of its market peers, and with valuations at 1.5x FY26 book value (BV), Jefferies finds the stock attractive.

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times)