Buy Mahindra & Mahindra Financial Services, target Rs 650: JM Financial
Buy Mahindra & Mahindra Financial Services Ltd. at a price target of Rs 650.
The current market price of Mahindra & Mahindra Financial Services is Rs 447.05.
Time period given by the brokerage is one year when Mahindra & Mahindra Financial Services price can reach the defined target.
View of the brokerage on the company:
Key takeaways from our meeting with Mahindra Finance (MMFS) management: i) Disbursement growth remains strong for July/August at c.30 per cent. Management expects 20 per cent+ AUM growth in FY19 (vs 18 per cent in FY18) which could accelerate to 25 per cent in FY20 ii) Asset quality is significantly improving and company has witnessed 5 per cent improvement in collection efficiency during July/August; Management expects GNPL to reduce to 7 per cent by FY19 (vs. 9.4 per cent in Q1) iii) MMFS expects 15bps increase in average outstanding cost of funds (incremental cost of funds up 75bps) which will be passed on via higher lending rate; iv) NPLs in the housing subsidiary have peaked and significant improvement is expected during 2HFY19 v) Management expects RoA/RoE to improve to 3 per cent/18-20 per cent by FY20 (vs. 1.8 per cent/11 per cent in FY18); We believe, with acceleration in growth and significant improvement in profitability, MMFS is well-placed to report top quartile return ratios over the next 2 years. We maintain BUY with a Mar’19 target price of Rs 650.