Mahindra & Mahindra Financial Services Ltd. share price target

MMFS logged muted growth/profitability in Q4FY25, with key numbers largely in line with our estimate; but PPoP and PAT were ~5% lower than consensus estimates. Despite the management’s persistent efforts and initiatives in recent years toward diversifying away from the wheels business, MMFS remained dominated by wheels – around 93% (PVs: ~40%).

Mahindra & Mahindra Financial’s (MMFS) 4QFY25 PAT declined ~9% YoY to ~INR5.63b (in line), while FY25 PAT grew ~33% YoY to INR23.4b. NII in 4QFY25 stood at INR19.3b (in line) and grew ~6% YoY.

Net earnings significantly beat estimates due to negligible credit costs driven by reversal of provisions. NII beat estimates, rising 3.2% to Rs. 1,911 crore, growing by 12.5%/5.6% (y-o-y/q-o-q) driven by AUM growth and higher than expected yield on portfolio.

MMFS delivered a stable quarter in terms of growth, margins, and credit costs. Quarterly PAT stood at ~Rs9bn, with the beat primarily driven by minimal credit costs, which resulted from the ECL-model refresh (leading to lower PD and LGD estimates).

Driven by the surge in credit cost (Q2: Rs7.0bn vs our estimate of Rs5.0bn and Q1: Rs4.5bn), MMFS reported weaker profitability in Q2FY25, with PAT at Rs3.7bn logging significantly below our estimate of Rs5.0bn.

We upgrade MMFS to BUY with our revised Sep-25E TP of Rs360 (implying FY26E
P/BV of 2x; up from Rs280 earlier).

We recently met Raul Rebello (MD & CEO) and Vivek Karve (CFO) of MMFS for an update on the company’s strategy and recent developments in the sector and the company.

MMFS reported a satisfactory set of numbers in Q1FY25, with PAT at Rs5.1bn coming below our estimate of Rs5.4bn and marginally above consensus estimate of ~Rs5bn.

Steady AUM growth, led by premiumization. Barring tractors, disbursements were healthy, which drove AUM up 23% y/y, 4% q/q.

Mahindra & Mahindra Financial’s (MMFS) 1QFY25 PAT grew ~45% YoY to ~INR5.1b (in line). NII stood at INR17.8b (5% miss), up ~13% YoY.

MMFS reported a satisfactory performance in Q4FY24, against the backdrop of
the already disclosed large-scale fraud at Company’s Aizawl branch comprising
of ~2.9K loan accounts and ~Rs1.36bn worth of loans

Net interest income (NII) at Rs. 1,812 crore (marginally above estimates) grew by 13% y-o-y/ 7% q-o-q. NIMs (cal.) improved by 14 bps q-o-q to 7.3%.

On 22-Apr-2024, MMFS informed the exchanges that it has detected a fraud in
one of its branches in the Northeast that involved forged KYC documents for
retail vehicle loan disbursements, thus leading to embezzlement of Company’s
funds