Anand Rathi's research report on Mahindra and Mahindra Financial Services
Steady AUM growth, led by premiumization. Barring tractors, disbursements were healthy, which drove AUM up 23% y/y, 4% q/q. The share of pre-owned vehicles continued to improve (up 100bps y/y) to 13%. SME finance grew faster than other products. We build in a modest 21% loan CAGR over FY24-26.
Lower spread; to further improve. Spreads reduced 20bps sequentially on more prudent lending. Management aspires to operating income increasing as all products have seen upward repricing of rates. Besides, fee income is likely to pick up traction. Cost-income increased 58bps q/q to 50.01% on subdued income. This is one of the core improvement areas for management.
Outlook
Q1 core income was in line with estimates, but lower provisions led to M&M Financial Services’ earnings beat. On its strong parentage, healthy growth and potential for improvement, we retain our Buy rating. We raise our FY26e. At our higher TP of Rs 340, the stock would trade at 1.7x FY26e BV (earlier 1.6x FY26e).
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