Buy M&M Financial with a target of Rs 344: Microsec
Microsec is bullish on Mahindra & Mahindra Financial Services and has recommended buy rating on the stock with a target of Rs 344, in its December 3, 2013 report.
December 09, 2013 / 12:12 IST
Microsec report on Mahindra & Mahindra Financial Services:
Mahindra & Mahindra Financial Services Ltd. a subsidiary of Mahindra and Mahindra Ltd. (One of the India’s leading tractor and utility vehicle manufacturers) was incorporated in 1991. It is one of the largest Non Banking Finance company (NBFC) catering to rural and semi urban markets. It serves over 2.5 million customers with a pan-India presence with largest network of 657 branches. The company is primary engaged in providing financing for new and pre owned auto, utility vehicles, tractors, cars and commercial vehicles. Apart from lending vehicles, it also provides housing loans and insurance services through its subsidiary Mahindra Rural Housing Finance Ltd (MRHFL) and Mahindra Insurance Brokers Ltd (MIBL). As on 31st March 2013, the company had an Asset Under Management of INR 27913 crores. We Initiate Coverage on Mahindra & Mahindra Financial Services Ltd. with a BUY rating. Our rating underpins company’s leadership position in rural and semi-urban region in automobile finance business, key beneficiary of rising rural cash flows, strong Principals & Customised Business Model, diversified product portfolio, diversified liabilities franchise, healthy growth in loan book, healthy credit rating and diversified funding mix, improving asset quality; strong risk management, superior growth in profitability, strong subsidiary growth and contributions, impressive return ratios, well capitalized and operationally efficient NBFC, and last but not least business are well aligned with regulator’s guideline. At the CMP of INR 299.70, the stock is trading at FY13 P/BV of 3.72x. On comparatively basis, valuation is higher than its peers. However, its higher valuation is justified by its higher Return Ratios, diversified business model and scaling up its subsidiary business. The current valuations of 3.11x FY14E and 2.55x FY15E Book Value looks attractive. We recommend a BUY on the stock with a target price of INR 344 (2.93x FY15E BV) with an upside of ~15% from the current level with an investment horizon of 12 months.Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions. 
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