Brokerage house Credit Suisse has retained its ‘outperform’ (not outperformance) rating on Mahindra & Mahindra Financial Services Ltd (MMFSL), citing good growth in disbursement after four quarters of decline.
MMFSL on Thursday reported a 9 percent rise in net profit at Rs 367 crore in the last quarter of 2014-15. For the full year 2014-15, total income rose 14 percent to Rs 6,061 crore as against Rs 5,301 crore in the same period last year.
Credit Suisse has upped its target price for the stock to Rs 340 versus earlier target of Rs 310.
According to Credit Suisse the continued investments made by the company gives confidence for the future and expects earnings per share (EPS) to go up by 2 to 5 percent on assumption of higher net interest margin.
Excerpts from the report
● The quarter showed signs of a pick-up in growth with positive 7% disbursement growth (after four quarters of decline). However, management refrained from calling a recovery already, cautioning that the macro situation is not yet improving.
● Asset quality indicators improved, with GNPA growth slowing sharply (45% YoY from 80%+ a few quarters ago) and provision coverage rising. We have been highlighting the investments made by MMFS into branches/employee force over the past 15 months and believe these are finally showing results.
● While seasonal volatility could push up non performing asset (NPA) numbers in the coming quarters, we believe year-on-year (YoY) trends are now firmly on an improving trajectory.
(posted by Vaishali Karulkar)
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