Mahindra & Mahindra Financial Services, the non-banking finance company, reported a 12% decline in its standalone net profit to ₹553 crore for the December quarter of FY24 from ₹629 crore in the same period last year.
M&M Finance’s net interest income (NII) in Q3FY24 rose 10% to ₹1,815 crore from ₹1,650 crore, YoY. NII growth was 8% QoQ. Net interest margin (NIM) stood at 6.8%, down from 7.4% YoY, but improved sequentially from 6.5%.
Read here: Mahindra Finance’s Q3 net profit declines 12% to ₹553 crore
Disbursement during the quarter ended December 2023 rose 7% YoY to ₹15,436 crore. The collection efficiency for the quarter was recorded at 95%, similar to levels observed in Q3FY23 and marginal reduction over Q2FY24.
During the quarter, the company saw further improvement in its asset quality, with stage 3 assets at 4.0% (vs. 4.3% as of September 2023 and 5.9% as of December 2022). Stage 2 at around 6% (vs. 5.8% as of September 2023 and 8.4% as of December 2022), Mahindra & Mahindra Financial Services said in a release.
M&M Finance Q3 result was better than most analysts’ estimates leading to brokerages raising target price on the stock. Here’s what brokerages said on Mahindra Finance Q3 results and its shares:
Nuvama Institutional Equities
After two weak quarters, M&M Financial Services posted healthy Q3FY24 results with NIM expansion driven by unwinding of dealer credit, lower credit cost partly due to refining of ECL and lower GS3 of 3.97% from 4.3% QoQ. Disbursals rose 7% YoY/16% QoQ while AUM grew 25.5% YoY/3.5% QoQ driven by high growth in vehicles, but a conscious slowdown in higher-ticket LAP due to intense competition and in consumer loans, said Nuvama Institutional Equities.
The brokerage revised FY24E and FY25E EPS estimates by +9 and -9% and upgraded the stock to ‘Hold’ from ‘Reduce’ earlier and also raised the target price to ₹280 per share from ₹260 earlier.
(Exciting news! Mint is now on WhatsApp Channels Subscribe today by clicking the link and stay updated with the latest financial insights! Click here!)
JM Financial
M&M Financial Services reported PAT significantly higher than JM Financial’s estimates primarily driven by meaningfully lower credit cost and improvement in NIM. Lower credit cost was on account of ECL model revision, better collection efficiency and lower write offs, which was a favourable outcome. Management indicated its prudent shift towards better quality customers is expected to keep credit costs in check, the brokerage noted.
“Finally the efforts of stringent risk management are starting to pay off and although opex has remained elevated, its impact on ROA will be offset by gradual improvement in credit costs and normalization of margins. We believe sustainable delivery of asset quality metrics should drive the rerating going ahead,” JM Financial said.
It maintained a ‘Buy’ call on the stock and raised the TP to ₹345 per share from ₹330 earlier.
M&M Financial Services is still going through a transformation in its product/customer mix, and its NIM profile will change as it finds its new sustainable normal. It will hopefully now start demonstrating more predictability in its earnings performance. A strong liability franchise and deep moats in rural/semi-urban customer segments position MMFS well to reap the rewards of the hard work that is going into evolving this franchise, Motilal Oswal said.
It reiterated a ‘Buy’ rating on the stock and revised the target price upwards to ₹340 per share.
Also Read: Larsen & Toubro share price declines 5% post Q3 earnings
Centrum Broking
Mahindra Finance reported earnings ahead of our and consensus estimates driven by improved NIMs, higher other income, controlled opex and low provisions. We expect AUM growth to taper down to 22% in 4QFY24 (was up 25.5% YoY in 3QFY24) and 17% in FY25E as disbursements growth decelerate, said Centrum Broking
It builds in AUM, PPOP and PAT CAGR at 17%, 20% and 17% over FY23-26E and expects RoA and RoE at 2.3% and 15.6% for FY26E. The brokerage firm maintained an ‘Add’ and raised the target price to ₹306 per share from ₹302 earlier.
Emkay Global Financial Services
According to Emkay Global, M&M Financial Services reported a good performance in Q3FY24, with RoA of 2.1%, driven by a gradual improvement in asset yields, sharp reduction in credit cost, and sustained improvement in asset quality.
Improved asset quality-led lowering of credit cost appears to be an outcome of some structural improvement owing to the company’s better underwriting and collections along with macro tailwinds benefiting the lenders, it said.
“In our view, MMFS’s strong Q3 performance signals a sustained improvement in profitability over coming quarters; however, it is unlikely that FY25E RoA will hit 2%. To reflect the Q3 performance, we have changed our FY24-26 estimates that leads to ~23% EPS increase for FY24E and ~4-6% for FY25E-26E,” said Emkay Global Financial Services.
It reiterated a ‘Reduce’ rating on the stock and raised the target price to ₹280 per share from ₹240 earlier.
M&M Finance shares have gained over 18% in the past three months, while the stock is up more than 24% in one year.
At 10:20 am, M&M Finance share price was trading 3.64% higher at ₹290.15 apiece on the BSE.
Catch Live Market Updates here
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it’s all here, just a click away! Login Now!
Download The Mint News App to get Daily Market Updates.
Published: 31 Jan 2024, 10:21 AM IST