Buy Mahindra Financial Services; target of Rs 525: Motilal Oswal

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Motilal Oswal 's research report on Mahindra Financial Services

MMFS reported PAT of INR3.8b (up ~1.5x YoY) under Ind-AS. The quarter was marked by robust disbursement and AUM growth, and an improvement in margins. Continuing the trend of the prior quarter, value of assets financed grew 44% YoY to INR109b. Consequently, reported AUM grew 6% QoQ (+27% YoY) to INR595b. Over the past year, the share of Auto/UV declined from 28% to 25%, the impact of which was offset by an increase in the share of SME financing (12% to 14%). Calculated NIM on AUM expanded 130bp YoY to 8.4%, driven largely by a higher yield on loans (driven by product mix and general yield hikes), despite an increase in cost of funds.

Outlook

Our SOTP-based target price is INR525 (Sept-2020 based). Maintain Buy.

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