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IDBI Capital Report
Mahindra and Mahindra Financial Services Ltd. assets under management growth remains strong at 24% YoY versus 25.5% (Q3 FY24); we expect 17% compound annual growth rate (FY24-26) AUM growth.
Further, reported improvement in net interest margins led by increase in yields. Management maintained the guidance of NIMs at 7% for FY25.
Asset quality improved with GS3 at 3.4% versus 4.0% QoQ backed by higher write offs. Net interest income grew by 8% QoQ led by improvement in NIMs. Pre-provision operating profit grew by 10% QoQ led by lower opex (up 6%QoQ).
However, PAT declined by 10% YoY led by one-time hit of Rs 1.35 billion for fraud related provision. Management revised guidance to 2.2% versus ~2.5% return on assets for FY25 (achieved 1.7% FY24).
We have revised estimates slightly downwards for FY25E (- 4.5% earnings per share). We maintain ‘Buy' on Mahindra Finance with target price of Rs 325 (earlier Rs 345), valuing it at 1.9 times (versus earlier two times price/adjusted book value) FY26E ABV as NIM improvement need to be seen.
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