M&M Financial Services Q2 Review: Jefferies Hikes Target Price Despite 'Modest' Growth Outlook

Jefferies has hiked the price target for M&M Financial Services Ltd., after the non-banking financial company (NBFC) reported its September quarter earnings for the financial year ending March 2026.

The brokerage firm has maintained its 'hold' rating on the counter, but has increased its 12-month price target for the counter, citing the profit beat and relatively decent asset quality metrics. The target price for M&M from Jefferies has been hiked to Rs 310 from Rs 298 earlier.

M&M Finance reported a 45% year-on-year increase in consolidated net profit for its second quarter, beating analyst estimates largely on the back of higher fees and other income.

The NBFC posted a net revenue of Rs 564 crore for the quarter ended Sept. 30, up from Rs 389 crore during the same period last year. Total consolidated income rose 12.7% to Rs 5,049 crore.

Despite the profit beat, however, Jefferies cites 'modest growth outlook' for M&M Finance, forecasting a 14% compounded annual growth rate (CAGR) of 14% for asset under management (AUM) over fiscal year 2026-28.

Jefferies added that M&M Finance's asset quality held up well, but noted that "write-offs stayed elevated."

The brokerage expects M&M Finance's net interest margins (NIM) to expand as interest rates ease. But in the meantime, it believes that these elevated write-offs may underpin credit costs and cap the lender's return on assets (RoAs).

One potential tailwind for the NBFC could be the momentum in the automotive sector, Jefferies adds.

The auto sector is a key growth driver for M&M Finance and given the current GST boost in the sector, the NBFC could emerge as one of the key gainers during the second half of this year.

Finally, Jefferies believes M&M Finance's valuation - currently at a price to book of 1.68 times multiple - is reasonable. As such, the brokerage expects modest upside to the stock over the course of next 12 months.