Mahindra Finance Q1 Results Review - Weak Performance; Lower Provisions Drive Beat In Earnings: Systematix

NDTV Profit’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 NDTV Profit’s subscribers an opportunity to expand their understanding of companies, sectors and the economy. .ICICI Securities Report.Mahindra and Mahindra Financial Services Ltd. operating performance was below expectation with net interest income/ OP at Rs 17.8 billion/ 11.3 billion versus estimate of Rs 18.6 billion/ 11.8 billion.However, with lower-than-expected provisions, earnings came in above estimates. Net interest income grew by a moderate 12% due to ~40 basis points contraction in net interest margin and slightly lower assets under management growth (22.6% YoY). Elections led disruptions, heatwave and floods have impacted disbursements during the quarter resulting in just ~5% YoY growth.Overall stressed assets pool (Stage 2 + Stage 3) increased QoQ to 9.7% (versus 8.4% in Q4 FY24) due to seasonality. Gross stage-III asset ratio inched up by 16 basis points QoQ and net stage-III asset ratio inched up by 18 basis points QoQ. Coverage on stage 3 ECL declined to 59.8% (versus 63.2% in Q4 FY24 and 60.1% in Q1 FY24).Management expects provision reversal in upcoming quarters and lower opex to drive return on assets (2.2% guidance for FY25 versus 1.8% in Q1), as margins remain in a tight spot due to rising cost of funds. We believe it is going to be a tightrope walk for the company.At current market price the stock is trading at 1.7 times FY26 book value with return on assets and return on equity of 2.2%/ 15.3%. We maintain our 'Hold' rating, with a target price of Rs 275, valuing the company at ~1.5x FY26E book value.Key risks: Continued slow down in underlying vehicle sales growth and further pressure on cost of funds can continue to impact growth and profitability..Click on the attachment to read the full report:.Budget 2024: New Employment Schemes Will Accelerate Workforce Formalisation, Says Neelkanth Mishra.DISCLAIMERThis report is authored by an external party. NDTV Profit 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 NDTV Profit..Users have no license to copy, modify, or distribute the content without permission of the Original Owner.

Mahindra Finance Q1 Results Review - Weak Performance; Lower Provisions Drive Beat In Earnings: Systematix

Management maintained its 2.2% RoA guidance and credit cost of ~1.4% in FY25, which the brokerage believes is going to be a tough to achieve given pressure on margins.

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Mahindra Finance Q1 Results Review - Weak Performance; Lower Provisions Drive Beat In Earnings: Systematix

Management maintained its 2.2% RoA guidance and credit cost of ~1.4% in FY25, which the brokerage believes is going to be a tough to achieve given pressure on margins.

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