Yes Securities sees 30% upside in this financial stock. Should you buy?
1 min read . Updated: 02 Feb 2023, 02:33 PM IST
Premium- Brokerage believes that financial stock may surged from current market price of ₹1265 to ₹1685 apiece levels in long term time horizon
Shriram Finance shares have been in downtrend after ushering in the new year 2023. The financial stock has dipped to the tune of 10 per cent in year-to-date (YTD) time. However, Yes Securities believes that Shriram Finance share price has strong fundamentals and for a long term investor this dip is a good opportunity buy or accumulate. The brokerage believes that Shriram Finance share price may go up to ₹1,685 from its current market price.
Highlighting the valuations of Shriram Finance shares, the brokerage says, "Management reiterated growth expectations of 15% pa and expects RoA/RoE to trend above 3%/15% on a steady-state credit cost of near 2%. In our view, double-digit growth for Shriram Finance looks plausible considering buoyancy in used CV/CE/PV markets and immense scope to distribute the small enterprise loan (SEL) product through the network of erstwhile Shriram Transport. "
Highlighting the liquidity levels of the financial company, Yes Securities said, "Shriram Finance witnessed strong sequential growth across its key product segments of used CV/PV financing, SEL and 2w loans. As per management, these key products would be made available across most/all branches over the next 3-4 quarters," adding, "While the product/AUM mix is unlikely to undergo any significant change in next couple of years, the share of SEL is estimated to rise in the longer run. Current BS liquidity covers 5 months of liability repayment, and the co. intends to hold such buffer in the near term."
On its suggestion to positional investors in regard to Shriram Finance shares, Yes Securities said, "Aided by merger benefits and the borrowings construct (lower share of bank loans), the CoF is expected to increase only gradually over the next couple of quarters. We expect the co. to deliver 12-15% growth in AUM and earnings in FY24/25 with RoE of 15-16%. Basis this expectation and an undemanding valuation (1.2x P/ABV and 6.6x P/E on FY24 estimates), we rate the stock as BUY with 12m PT of ₹1685. "
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
