Buy Mahindra and Mahindra Financial Services: target of Rs 220: Sharekhan

Sharekhan's research report on Mahindra and Mahindra Financial Services

M&M Financial Services (MMFS) posted higher-than-expected PAT due to significant improvement in asset quality, leading to lower credit costs. PAT was at Rs. 601 crore versus our expectation of Rs. 395 crore, up ~300% y-o-y and down ~33% q-o-q. Further, disbursements grew strongly by 54% y-o-y and 15% q-o-q to Rs. 9,202 crore, aided by robust growth in CV/CE, pre-owned, and SME and other segments. Asset quality improved sequentially with GNPL declining by ~130 bps y-o-y to 7.7% in Q4FY2022. This was primarily due to higher collection efficiencies and write-offs. The company articulated its Vision 2025 with goals on AUM growth, asset quality, NIM, cost ratios, and RoA target going forward. At the CMP, the stock trades at 1.2x and 1.1x its FY2023E and FY2024E P/BV, respectively.

Outlook

We maintain our Buy rating on the stock with a revised PT of Rs. 220.