Mahindra Finance Q2 Review - Weak Operating Performance Overshadowing Robust Asset Growth: Dolat Capital

BQ Prime’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer BQ Prime’s subscribers an opportunity to expand their understanding of companies, sectors and the economy..Dolat Capital Report.Mahindra and Mahindra Financial Services Ltd. reported profit after tax of Rs 2.4 billion (down 33% QoQ; -55% YoY) missing both consensus (Bloomberg) and our estimate by 51%. The miss is attributable to-contracting margin (net interest margin down 50 basis points QoQ) and higher than anticipated credit cost of 2.8% (our estimate: 1.8%). On NIM, Mahindra Finance had anticipated a decline of 20-30 basis points in cost of funds that did not play out. A higher credit cost was attributed to temporary slippages with majority in the tractor segment that are set to reverse in H2. Guidance is for improving NIM trajectory and credit cost settling at 1.5-1.7% in FY24. We view the risk reward is turning favorable with growth returning (FY23 / H1 FY24 disbursements up 80% / 20% YoY respectively) and asset quality fears abating (gross stage-3% stable QoQ / gross stage-2% improving 70 bps QoQ). However, addressing the profitability gap will be key for achieving 2.5% return on asset guidance and turning constructive on Mahindra Finance outlook. We cut our earnings per share estimates by 18-29% for FY24-FY25 on account of weak margin and higher credit cost. Our revised target price stands at Rs 300 (March 2025)..Click on the attachment to read the full report:.M&M Finance Q2 Results: Profit Falls 47% On Higher Provisions.DISCLAIMERThis report is authored by an external party. BQ Prime does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of BQ Prime..Users have no license to copy, modify, or distribute the content without permission of the Original Owner.

Mahindra Finance Q2 Review - Weak Operating Performance Overshadowing Robust Asset Growth: Dolat Capital

Share of high yielding small and medium enterprise book in the overall mix declined 7% YoY and 1% QoQ to 3%.

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