Buy Mahindra and Mahindra Financial; target of Rs 350: Motilal Oswal

Motilal Oswal's research report on Mahindra and Mahindra Financial

MMFS has exhibited volatile operating performance and weak asset quality in the past. However, the management has undertaken various strategic initiatives, which we believe, if executed properly, could script a credible transformation of the company. MMFS has translated the KPIs introduced under Mission 2025 into strategic priorities, such as expanding its presence, leveraging technology to drive operational efficiency, developing new products and making process enhancements. The management is committed to investing in new capabilities and advanced technological solutions to reduce volatility in the company’s operating performance. In the last fiscal year, MMFS strengthened its leadership position in the tractor, Mahindra Auto and non-Mahindra financing segments with improvement in market shares. The improved rural cash-flows should support demand sentiment in FY24. The company is also increasing its penetration in the used vehicle segment.

Outlook

Strong moats in the rural/semi-urban customer segments position MMFS well to reap the rewards of the hard work that is going into evolving this franchise. We model a CAGR of 19%/20% in AUM/PAT over FY23-FY25E, with RoA/RoE of 2.3%/15.4% in FY25E. We have a BUY rating on the stock with a TP of INR350 (premised on 2.2x FY25E P/BV).