Hold Mahindra and Mahindra Financial Services; target of Rs 230: 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 Rs4.4 bn above our estimates of Rs 2.2bn due to sharp drop in provisions. Provisions at Rs1.9bn dropped sharply from Rs 6.4bn in Q1’23 as collection efficiencies showed improvement. Write-offs of Rs5.3bn was taken in this quarter compared to Rs5.7bn taken in Q1’23. SME and new businesses AUM recorded 60% QoQ growth could be a major growth driver. Tractors/Cars showed positive QoQ AUM growth of 2.9%/5% respectively after seeing a de-growth in the last quarter. Our FY23 and FY24 EPS estimates are upgraded by 2.9%/4.2% respectively as we cut our provisions estimates of FY23/FY24 by .86%/2.1% as collection efficiency has improved and management does not foresee any impairment charge on account of IRAC migration in FY23 . One has to closely monitor the growth and credit costs in the upcoming quarters.

Outlook

We maintain our ‘HOLD’ rating on the stock and increase our price target to Rs 230 from Rs 200 as we value MMFS at 1.9x PABV Sep’24E.

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