Mahindra & Mahindra Financial Services Ltd. reported June-quarter earnings that prompted multiple brokerages to raise their target prices after the lender delivered stronger-than-expected profitability, supported by lower credit costs, resilient asset quality and stable margins.
Brokerages said the company started FY27 on a strong footing despite a seasonally weak quarter, with improving underwriting, healthy disbursement growth and lower provisioning supporting earnings. Most analysts also said improving asset quality and technology-led initiatives strengthened the medium-term outlook, while the progress of the monsoon remains the key monitorable for the rest of FY27.
The company reported double-digit growth in consolidated income and a sharp rise in profit during the quarter.
M&M Financial Services Q1 Highlights (Consolidated, YoY)
Total income rose 14% to Rs. 5,725 crore from Rs. 5,013 crore.
Profit increased 75% to Rs. 927 crore from Rs. 529 crore.
On the standalone business, disbursements rose 22% year on year to Rs. 15,564 crore, the highest ever for a first quarter, while assets under management grew 13% to Rs. 1.37 lakh crore. Net interest margin expanded to 7.3% from 6.7%, while credit cost improved to 1.5% from 1.9%.
Asset quality continued to improve during the quarter. Stage 3 assets declined to 3.5% from 3.8% a year earlier, while Stage 2 assets fell to 4.9% from 5.9%. Collection efficiency remained stable at 95%.
The company said its vehicle finance business continued to maintain its leadership position in tractor financing, while diversification beyond vehicle lending gathered pace. Non-vehicle finance disbursements, including Mahindra Rural Housing Finance Ltd., grew 79% year on year, supported by investments in digital and AI capabilities.
Here's What Brokerages Are Saying After M&M Financial Services Announced Q1 Results
Morgan Stanley
Maintained 'Equal-weight'; Target Price Raised To Rs. 370 From Rs. 335
Profit was 7% above estimates due to lower operating and credit costs.
Raised FY27-FY29 EPS estimates by 8%.
Higher target price reflects macro risks, historical volatility and cyclicality.
Macquarie
- Maintained 'Underperform'; Target Price At Rs. 270
Said the company made a strong start to the year.
Profit beat estimates due to lower credit costs.
Margins remained resilient and asset quality improved.
Sustainability remains the key monitorable.
Jefferies
- Maintained 'Hold'; Target Price Raised To Rs. 365 From Rs. 325
Profit beat estimates due to lower provisions.
Asset quality remained resilient.
Expects gradual improvement in AUM growth and stable net interest margins.
Technology and management initiatives are improving underwriting.
Retained Hold due to monsoon-related risks.
Nomura
- Maintained 'Buy'; Target Price Raised To Rs. 415 From Rs. 400
Profit beat its estimate by 25% and Bloomberg consensus by 11% due to lower operating expenses and credit costs.
Said asset quality trends remained healthy despite a seasonally weak quarter.
Raised FY27-FY29 EPS estimates by 2%-4% after lowering credit cost assumptions and adjusting cost of funds.
Expects 16% disbursement growth in FY27-FY28 despite monsoon-deficit risks.
Management targets 16%-18% medium-term loan CAGR, driven by growth in both vehicle finance and new businesses.
Reaffirmed 'Buy' as improving asset quality and organisational changes strengthen the investment case.
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