Prabhudas Lilladher's research report on Mahindra and Mahindra Financial Services
MMFS earnings were in-line with estimates with PAT at Rs4.2bn (PLe: 4.4bn) on the back of lower provisioning as collections & recoveries were better than expected. Operational miss was from lower income from yield pressure despite better than expected AUM growth of ~18% YoY and on higher opex due to one-off expenses. Management remains optimistic on improving rural cash flow and improving infra activity which should lead to growth of 18-20% in FY19 across segments and will lower provisioning requirement. Rural recovery should agur well for growth and recovery from NPAs can bring tailwind to earnings helping deliver ROA of 2.6-2.8% by FY20.
Outlook
We retain Accumulate with revised TP of Rs553 (up from Rs530) based on 3.3x Mar-20 ABV (rolled from Sep-19) inclusive of Rs69 as value of subsidiaries.
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