Prabhudas Lilladher recommended accumulate rating on Mahindra and Mahindra Financial Services with a target price of Rs 516 in its research report dated October 24, 2018.
Prabhudas Lilladher's research report on Mahindra and Mahindra Financial Services
JUBI has given cautiously optimistic outlook for coming quarters as rising competition and increasing visibility of food aggregators is increasing manpower cost (19.5% of sales) and availability (~28000 employees) even as benign dairy prices and strong traction in EDV provide tailwinds. JUBI seems confident of holding on to its turf, although we expect some softening in growth rates due to high SSG base, just 37 store additions in past 6 quarters (0.8% gap between system sales growth and Dominos SSG). Dunkin Donuts turnaround is on track (loss at 50bps, breakeven by 4Q19) led by strong SSG growth in Donuts and Beverages, store closures are likely to be minimal. We are cutting our P/E multiple from 45 to 40 given 1) normalised PAT CAGR of 24% over FY18-21 post high growth of last 6 quarters and 2) increase in comeptitive activity from food aggregators.
We value the stock at 40xDec20 EPS and arrive at target price of Rs1395. Retain Accumulate.
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