Mahindra & Mahindra Financial Services Ltd. share price target

ee costs (+11.2% YoY) and other operating expenses (+25.2% YoY). Net profit grew 3.2% YoY to Rs. 530cr, as tax expenses came down by 5.5% YoY. Gross stage 3 (GS3) ratio increased from 3.56% in Q1FY25 to 3.85% in Q1FY26,...

Net earnings were in line with expectations at Rs. 529 crore, increasing 3.2% (y-o-y) but declining 6.0% (q-o-q). This was driven by strong PPOP growth, though higher credit costs offset it.

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. 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...

Not surprisingly, MMFS posted muted results in Q1FY26, with PAT at ~Rs5.3bn largely hit by elevated credit cost (~25bps higher than our estimate of ~1.9% of business assets), and YoY AUM growth of 15%/disbursement growth of only 1%.

Mahindra & Mahindra Financial’s (MMFS) 1QFY26 PAT rose ~3% YoY to ~INR5.3b (in line). NII in 1QFY26 stood at INR20.1b (in line) and grew ~13% YoY.

MMFS' NIMs improved by 20bps QoQ led by improvement in yield on assets. Management guided for NIMs to improve from here on with positive impact of rate cut on cost of funds. Asset quality deteriorated with GS3 at 3.85% vs 3.7% QoQ led by higher write offs. Q1 generally is slow quarter with respect to collections. AUM growth slowed down to 15% YoY (17% YoY FY25) led by lower disbursements; we expect 14% CAGR over FY25-27E. NII grew by 20% YoY led by rise in NIMs. PPoP grew by 19% YoY led by lower operating expenses (up 17% YoY). PAT grew slowly by 3% YoY led by higher provisions (up 47% YoY). Thus, RoA...

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.