Shriram Finance: Target Price Raised to Rs 1200 by Prabhudas Lilladher

Shriram Finance Sees Strong Growth in Q4FY26, Maintains 'BUY' Rating

Shriram Finance's asset under management (AUM) for the fourth fiscal quarter (Q4FY26) grew by 14.8% year-on-year (YoY) to INR 3,022.7 billion, driven by strong growth in the commercial vehicle (CV), passenger vehicle (PV), and gold portfolios. The company has witnessed a pick-up in new vehicle financing, although management remains cautious due to ongoing uncertainty related to the West-Asia conflict and fuel price hikes.

In its research report, Prabhudas Lilladher forecasts a compound annual growth rate (CAGR) of approximately 17% in AUM over the fiscal years 2026-2028, led by higher volumes in vehicle financing (VF) and continued expansion in the non-VF portfolio. The net interest margin (NIM) came in at 8.6%, supported by a reduction in cash and cash equivalents (CoF). Prabhudas Lilladher expects NIM to improve by approximately 20 basis points in fiscal year 2027.

The company's headline asset quality saw a slight deterioration due to higher stress in the micro, small, and medium enterprises (MSME) segment. However, Shriram Finance maintains an adequate provision cover of approximately 6% of its total loan book. Prabhudas Lilladher has built a credit cost of 2.0% and 1.9% in fiscal years 2027 and 2028, respectively, as the company expands its commercial vehicle (CV) portfolio.

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In light of the cautious growth outlook, Prabhudas Lilladher has tweaked its estimates for fiscal years 2027 and 2028. The research firm maintains a 'BUY' rating on Shriram Finance with an unchanged price multiple of 2.3 times on March 2028's adjusted book value (ABV) and a target price of INR 1,200.