Buy Mahindra Finance; target of Rs 360: Emkay Global Financial

Emkay Global Financial is bullish on Mahindra Finance has recommended buy rating on the stock with a target price of Rs 360 in its research report dated January 29, 2025.

Broker Research

February 03, 2025 / 21:09 IST

BUY

Emkay Global Financial's research report on Mahindra Finance

MMFS delivered a stable quarter in terms of growth, margins, and credit costs. Quarterly PAT stood at ~Rs9bn, with the beat primarily driven by minimal credit costs, which resulted from the ECL-model refresh (leading to lower PD and LGD estimates). The company continues to expand into new categories beyond vehicle financing, through focus on SME lending, leasing, insurance, payments, mortgages, and cross-sell. Resultantly, margin improved to 6.6% in Q3 (10bps sequential improvement) and this improvement is expected to continue in the near-to-mid term. However, we believe the segment diversification will keep opex elevated in the near term (medium-term guidance of 2.5-2.7%). The mgmt remains confident of delivering mid-to-high teens growth and containing the credit costs within 1.3-1.5%, and believes this will help achieve its near-term ROA target of ~1.8-2% by FY25. Overall, its well thought out strategy and effective resource allocation are driving profitable growth,

Outlook

With reduced volatility and higher predictability. Considering the recent performance, changes in ECL estimates, and the company’s strategy around asset mix, we revise our FY25 PAT estimates upward, which leads to a 12% increase in our EPS projections. We reiterate BUY on the stock, with unchanged TP of Rs360.

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