On Monday, CLSA maintained its Outperform rating on Shriram Finance Ltd (SHFL:IN) stock and increased the price target to INR 3,600.00, up from the previous INR 3,350.00. The revision follows Shriram Finance's second-quarter financial results for fiscal year 2025, which reported a net profit of INR 20.7 billion, aligning with CLSA's expectations.
The firm experienced a robust 20% growth in Assets Under Management (AUM), fueled by a healthy 16% year-over-year increase in disbursements. The commercial vehicle and construction equipment (CV/CE) segment saw mid-teen year-over-year growth in disbursements, while disbursements in the Micro, Small & Medium Enterprises (MSME) sector nearly doubled. This substantial growth in the MSME sector is attributed to the synergies realized from a recent merger.
A particularly positive note from the analyst was the trend in asset quality. Shriram Finance's net slippage remained consistent with the previous three quarters, which stands out especially when compared to peers who experienced an increase in slippages during the same quarter. However, the operating expense (opex) ratios were higher than anticipated due to the expansion of the company's branch network. Improvements in this area are expected in the following year.
Despite these higher operating expenses, CLSA's net profit estimates for Shriram Finance for the fiscal years 2025 to 2027 remain largely unchanged. The price target increase to INR 3,600 is justified by rolling the valuation forward to September 2026, using a 2 times price-to-book (PB) ratio based on September 2026 consensus ledger (Sep 26CL). The Outperform rating indicates CLSA's positive outlook on the stock's future performance.
