Buy Mahindra Financial Services; target of Rs 590: HDFC Securities

HDFC Securities is bullish on Mahindra Financial Services has recommended buy rating on the stock with a target price of Rs 590 in its research report dated July 31, 2018.

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September 18, 2018 / 14:12 IST

26 Aug, 2025 12:21

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HDFC Securities's research report on Mahindra Financial Services

The pullback in asset quality sustained as MMFS reported a sizable reduction in the gross stage III NPAs (9.4% vs. 14.5% YoY). The usual 1Q hiccup was also curbed as sequential stress accretion was lower than previous years (270/150bps in FY17/18). The spike is credit cost is primarily due to higher provisioning on stage I and II under the ECL methodology as per IND AS. Robust growth (+23% coupled with steady margins (despite the rise in CoF) led to an earnings beat.

Outlook

A comfortable capital position (CRAR of 21.9% post the fund raise) should also help. Given the deep presence (1284, 108 opened in the last 12 months) and rural focus, MMFS will be the biggest beneficiaries of improving rural macros and a good monsoon. Maintain BUY with a TP of Rs 590 (3.5x Mar-20 ABV of Rs 163 + Rs 18 for MIBL).

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