Sharekhan's research report on Mahindra and Mahindra Financial Services
M&M Finance reported strong performance in Q3FY2023 with PPoP significantly above consensus and our estimates reported at Rs. 998 crore (down 6% y-o-y/up 16% q-o-q). NIM (calculated as a percentage of average Loan assets) was stable q-o-q at 8.2%. Opex growth moderated with opex-to-average loan assets at ~3.4% vs. ~3.8% q-o-q. PAT was also ahead of expectation reported at Rs. 629 crore (down 30% y-o-y/up 40% q-o-q), led by strong PPoP and lower credit cost. Total credit cost was at 82 bps vs. 112 bps q-o-q. Gross stage-3 and net stage-3 assets declined by ~77 bps/39 bps q-o-q to 5.93%/2.52%. PCR on Stage-3 assets improved to 59% vs. 58% q-o-q. Gross Stage-2 assets also declined by 130 bps q-o-q to 8.4%. Loan assets grew by 21% y-o-y/5% q-o-q to Rs. 77,344 crore, aided by strong disbursement growth of 80% y-o-y/22% q-o-q. The company is benefitting from strong sectoral tailwinds and, its parent, Mahindra & Mahindra’s (M&M) strong recovery in auto volumes. This is reflected in strong disbursement growth, and we expect this momentum to sustain.
At the CMP, the stock trades at 1.8x/ 1.6x/ 1.3x its FY2023E/FY2024E/FY2025E BV estimates, respectively. We maintain Buy with a revised PT of Rs. 290.
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Mahindra & Mahindra Financial Services - 06 -02 - 2023 - khan