Buy Mahindra & Mahindra Financial; target of Rs 325: Motilal Oswal

Motilal Oswal's research report on Mahindra & Mahindra Financial

Mahindra & Mahindra Financial’s (MMFS) 4QFY24 PAT declined ~10% YoY to INR6.2b (15% miss). Adjusted for provisions on Mizoram fraud, PAT would have been INR7.2b (in line). FY24 PAT fell 11% YoY to INR17.6b. NII stood at INR18.1b (in line), up 13% YoY. Other income rose 30% YoY to ~INR1.6b, driven by better fee income. Credit costs at INR3.4b included provisions of INR1.36b related to fraud in Mizoram. Annualized credit costs stood at 1.4% (flat QoQ).

Outlook

MMFS would hopefully now start demonstrating more predictability in its earnings performance. A strong liability franchise and deep moats in rural/semiurban customer segments position MMFS well to reap the rewards of the hard work that is going into evolving this franchise. MMFS currently trades at 1.5x FY26E P/BV. Risk-reward is favorable for a PAT CAGR of 40% over FY24-FY26E and FY26E RoA/RoE of 2.4%/17%. Maintain BUY with a revised TP of INR 325 (based on 1.8x FY26E BVPS).