M&M Financial Q2 Review: Analysts See Weak H2, Cut Earnings Estimates, Target Price

Mahindra and Mahindra Financial Services Ltd.'s earnings estimates and target price were cut by brokerages after its management lowered the company's guidance for assets under management growth, margins, and return on assets, reflecting weaker performance in the October-March period.

The non-banking finance company reported a 57% jump in its net profit in the second-quarter on the back of a rise in total income and assets under management. However, profit missed analysts' estimates.

The company reported a net profit of Rs 369 crore in the quarter ended Sept. 30, 2024, according to an exchange filing. That compares with the consensus estimates of Rs 473 crore given by analysts polled by Bloomberg.

Systematix Institutional Equities has cut its target price on the stock by 5% to Rs 260 as it expects the company to report a weak performance in the second half of the current financial year followed by lower guidance.

"...we cut our NII, operating profit, and profit after tax estimates by 2.9%, 5%, and 11% for fiscal 2025 and 2.8%, 4.8%, and 7% for fiscal 2026, respectively," the brokerage said. It maintains a 'hold' rating on the stock.

The management has lowered their return-on-asset guidance to 1.8-2.00% from 2.2% earlier for the current financial year and expects net interest margins of 6.5-6.7%. The management has provided guidance for moderate loan growth in the current financial year and beyond.

Citi Research has also cut its target price by 3% to Rs 300 as a higher stress pool and credit cost in April-September led the brokerage to increase its credit cost expectations to 1.7-1.8% from 1.5% over 2024-25 to 2026-27. It has also lowered its earnings estimates until 2026–27 but has maintained its neutral stance on the stock.

IDBI Capital Markets Research echoed a similar view, lowering its price target on the stock by 3% to Rs 315 and maintaining its 'hold' stance.

On the other hand, Emkay Global Financial Services is still of the opinion that the non-bank lender's strategic path is the right one, but execution will be key. The brokerage maintains its target price of Rs 360 and reiterated a 'buy' call as the palatable valuation in the near term makes the stock attractive.

Motilal Oswal Financial Services too maintains its 'buy' rating on the stock, with a target price of Rs 335.