Hold Mahindra and Mahindra Financial Services; target of Rs 200: Prabhudas Lilladher

Prabhudas Lilladher's research report on Mahindra and Mahindra Financial Services

MMFS reported a decent set of numbers with PAT coming in at Rs2.2 bn below our estimates of Rs 6.1bn due to sharp rise in provisions. Provisions at Rs6.4bn rose sharply up from Rs.64bn in Q4’22 due to elevated write-offs from repossessions. Write-offs of Rs5.7bn was taken in this quarter but management believes this should moderate over the course of FY23. Used vehicles AUM with a strong 16% QoQ growth could be a major growth driver, as their demand is really picking up now. Tractors/Cars segments remain soft although company has maintained leadership position in tractor and Mahindra UV financing segments Our FY23 and FY24 estimates are unchanged, as cost pressures are expected to kick in and be compensated by strong AUM growth driven by recovery in auto volumes. One has to closely monitor the credit costs and write-offs in the upcoming quarters.

Outlook

Hence we maintain our ‘HOLD’ rating on the stock and our price target remains unchanged at Rs200 as we value MMFS at 1.8x PABV Sep’24E.

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