Hold Mahindra and Mahindra Financial Services; target of Rs 285: Prabhudas Lilladher

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

Q1 disbursement growth was flat YoY with a weakness in the CV/ PV/ SME segment; AUM grew 15% YoY to Rs 1,220 bn. Expect NIM to improve in subsequent quarters aided by a boost in fee income/Used Vehicle mix and lower CoF. Expect opex costs to be elevated as the company invests in business transformation. Asset quality saw a seasonal weakness in the quarter; we continue to be watchful of collection efficiency trends.

Outlook

We value the standalone business of MMFS at 1.3x FY27E P/ABV. Our SOTP ascribes a valuation of Rs 269 for the standalone business and Rs 16 for subsidiaries, with a 25% Holding Co. discount, to arrive at a TP of Rs 285. Low visibility on growth and weak asset quality trends weigh on profitability. Assume coverage with a HOLD rating.

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