Mahindra & Mahindra Financial Services Ltd. share price target

Mahindra & Mahindra Financial Services (MMFS) reported strong operating performance. AUM grew 14% YoY to almost reach INR500b, registering the fifth straight quarter of 13-14% AUM growth. Growth was driven primarily by tractors (+14% YoY), pre-owned vehicles (+14% YoY), and SME (+71% YoY). MMFS bit the bullet and migrated its NPL recognition to 90dpd. GNPL ratio declined 20bp QoQ and 70bp YoY to 10.3% on 120dpd. GNPL ratio on 90dpd was 12.5%. MMFS targets to bring it down to 9-10% by end-FY18. MMFS incurred a provisioning cost of INR 4.45b in the quarter, of which...

MMFS reported PAT of INR 780mn in 2Q18 (vs. JMFe of PAT Rs1.39bn) as credit costs remained elevated at 396bps (vs.313bps in 2Q17) due to migration to 90DPD this resulted in additional provisions of INR 177mn and income reversal of INR 70mn; adjusting for which PAT stood at INR 2.43bn (156% YoY). Asset quality witnessed signs of improvement as Gross NPL (on 120DPD) on an absolute basis increased by just 8% YoY and GNPL ratio (on 120DPD) improved 72bps YoY to 10.5%. GNPL ratio stood at 12.6% (on 90DPD) while coverage ratio remained stable at 51% (vs. 51.8% on 120DPD) despite migrating to 90DPD. AUM growth remained stable at 14% YoY while margins (NII/AUM) increased 15bps YoY...

Asset quality improvement to boost RoA going forward Key takeaways from our meeting with Mahindra Finance (MMFS) management: 1) Asset quality is significantly improving due to a 5-6% improvement in collection efficiency YoY and a reduction in disposable losses on account of lower repossessions; 2) With incremental NPLs coming down, focus has now shifted to accelerate its growth; the company expects 15%+ growth in FY18 (vs. 14% in FY17) driven by growth in segments such as pre-owned vehicles, tractors and CEs; 3) Management expects RoA to improve to 2% at end-FY18 (vs. 1.1% in FY17) on a like-to-like basis (120DPD); 4) Management expects the housing subsidiary to...

Operating Income grew by 22.48% to Rs. 1825.45 Cr in Q4FY17 when compared to the previous quarter. Also, it rose by 9.17% when compared with Q4FY16.

MMFS 4QFY17 results were a mixed bag. Its core performance was better than expectations, led by disbursals/AUM growth of 23/14%, calc. NIM improvement of ~300bps, GNPA decline of ~17% with a resolution of ~2/3rd of the contracts in RBI dispensation, improvement across major stressed states and PCR improvement ( 540bps QoQ).

MMFS 3QFY17 results were below estimates. Led by higher provisions (Rs 4.2bn, 38% QoQ) and muted NII (interest reversals of Rs 650mn), it reported a PBT loss of Rs 241mn. However, RBI?s forbearance enabled MMFS to report 1.5% lower GNPAs (11.1%) and postpone P&L impact of Rs 1.5bn.

MMFS' 1QFY17 results disappointed. In a seasonally weak quarter, G/NPAs jumped ~37/70% QoQ. As asset quality deteriorated, NIMs declined ~330bps QoQ (interest reversals of Rs 1.3bn) and provisions jumped ~2.1x QoQ (even after a write-back of Rs 1.9bn). Core earnings at Rs 6.75bn (-33% QoQ) and net earnings at Rs 870mn (-77% QoQ) were below estimates. Business momentum (disbursements +8% and AUM +11%) was muted with focus on collections vs. growth. HDFC Securities Maintain BUY with a revised TP of Rs 340 (3x Mar- 18E ABV of Rs 111 + Rs 8/sh for MIBL).

Trendlyne has 14 reports on M&MFIN updated in the last year from 4 brokers with an average target of Rs 320.8.Brokers have a rating for M&MFIN with 2 upgrades,5 price upgrades in past 6 months and 1 downgrades,4 price downgrades in past 1 Year.

Key takeaways from Q1FY17 : 8 NII declined 5.7% yoy to Rs 6.8bn, below our expectation, as NIMs contracted 116bps yoy to 6.5% and AUM growth remain sluggish at 11%. 8 Disbursement growth remained moderate at 8% led by flat growth in Auto/ UV/ Cars, even as Tractors and commercial vehicle reported healthy growth of 15% and 40% respectively.Phillip Capital Maintain BUY with a PT of Rs 350 (unchanged). They value MMFS standalone at 2.4x March 2018 BV, implying a value of 323, MRHF at 14 per share, and MIBL at 13 per share.

Trendlyne has 13 reports on M&MFIN updated in the last year from 4 brokers with an average target of Rs 296.8. Brokers have a rating for M&MFIN with 2 upgrades,3 price upgrades in past 6 months and 1 downgrades,5 price downgrades in past 1 Year.

9 PAT came in ahead of expectation led by higher interest writeback and lower provisioningduetorobustrecoveries. Collectionefficiencywashigherat107%. 9 Asset quality surprised positively with sharp improvement in GNPA, despite a shift to...