We upgrade the stock to ‘Accumulate’ on sustainable growth and margin outlook over the medium term. The management of MMFS expects disbursement growth to pick up in H2FY26 with a strong uptick in tractor and PV volumes. Q2 AuM grew 13% YoY to Rs1,272.5bn; we build 15% for FY26E. Further, the management expects NIM to be resilient at ~7% over the medium term, supported by a favorable mix, boost in fee income, and lower CoF. Weak asset quality and elevated credit cost over the near term will weigh on profitability; however, we expect credit cost to normalize by FY27/ FY28E. Over the long term, the company expects RoA to improve to ~2.5%; we build 2.1% for FY28E.
OutlookWe value the standalone business of MMFS at 1.6x Sep’27E P/ABV (vs. 1.3x earlier). Our SOTP ascribes a valuation of Rs359 for the standalone business and Rs16 for subsidiaries, with a 25% holding company discount, to arrive at TP of Rs375. Upgrade to ‘Accumulate’.
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