Buy Mahindra Finance; target of Rs 360: Emkay Global Financial

Emkay Global Financial's research report on Mahindra Finance

As the company's Mission 2025 nears its finishing line, it has been a case of ‘glass half full’. With Q2FY25 business updates already lowering expectations on growth and the asset quality front, we believe the negativities around growth, asset quality, and profitability are already priced-in with MMFS shares down 17% QTD Q3FY25 (vs NIFTY down ~4% and NIFTY Midcap down 3%). Notwithstanding some setbacks caused by the confluence of internal and external factors, we see the management's medium-to-long term strategy to deliver diversified and profitable growth to be gradually progressing on the right track. Overall, beyond the gradual expansion toward 2.2% in the near term, beginning of the rate-cut cycle, rebound in tractor sales, seasonal improvement in asset quality, absence of MFI and unsecured PL exposure, and the palatable valuation at FY26E P/B of 1.6x make a strong BUY case for MMFS.

Outlook

We upgrade MMFS to BUY with our revised Sep-25E TP of Rs360 (implying FY26E P/BV of 2x; up from Rs280 earlier), as we see the inflection point for MMFS in terms of growth, asset quality, and profitability to be around the corner.