Broker’s call: Shriram Finance (Buy)

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Target: ₹700

CMP: ₹520.80

Shriram Finance (SHFL) offers a well-diversified product suite and has emerged as a strong player across all its product segments. It has demonstrated strong execution capabilities and asset quality resilience while navigating multiple credit and economic cycles.

Even though things might appear to be moving slowly on the economic front in India, we believe that economic activity (such as infrastructure, real estate, and mining) will pick up in the next 3-6 months, resulting in healthy demand for commercial vehicles (CV). On the flipside, even if the new CV segment slows down, SHFL remains better positioned than its peers, owing to its strong foothold in the used CV segment.

SHFL is yet to fully tap its expanded distribution network (from the merger) to offer a much wider product bouquet to its customers. The company is effectively leveraging cross-selling opportunities to reach new customers and introduce new products, resulting in improved operating metrics and a solid foundation for sustainable growth.

The current valuation of about 1.3x FY27E BVPS is attractive for a 19 per cent PAT CAGR over FY24-27 and RoA/RoE of around 3.3/17 per cent in FY27.

SHFL is our top pick in the NBFC sector with a TP of ₹700 (based on 1.7x FY27E BVPS).