M&M Finance Shares Rose 6% after Strong Q4 Result

M&M Financial Services reported a 14% rise in fourth-quarter net income.

On May 2, Mahindra and Mahindra Financial Services Ltd (MMFS) was trading more than 6% higher at Rs 270.90 on NSE in the morning trade after the company stated a healthy rise in net profit in Q4FY22-23.

Mahindra Finance’s quarterly net profit plunged 14% YoY to Rs 684 crore. Net interest income (NII) was at Rs 1,723 crore, up 13% from the year-ago period. Aggregate income rose 24% YoY to Rs 3,057 crore.

The quarter’s disbursement came in at Rs 13,778 crore, up 50% YoY. Consequently, the loan book rose 27% to Rs 82,770 crore.

At 9:57 am, the share traded at Rs 275 on the NSE, up 6.2% from the previous close.

JP Morgan has shown a neutral rating on the stock and a target price of Rs 230 per share. Q4 was 8% ahead of JP Morgan’s estimations, driven by zero provisions. Pre-operating profit (PPoP) fell 5% QoQ, given the higher opex.

NIM decline was controlled. Credit costs were low, and a reserve drawdown occurred over the year. Asset under management (AUM) growth was assisted by full-year disbursement growth. Operating expenditure on franchise build-out remained high.

Morgan Stanley gave the stock an “overweight” rating with a target price of Rs 310. The company delivered robust asset quality and loan growth. The stock is up 50% in the last year. The P/B has re-rated above the five-year mean. The RoE is anticipated to improve to 13% in FY24 and 15% in FY25, respectively.

Jefferies gave a “hold” rating with a target price of Rs 270. The Q4 Profit after Tax (PAT) was down 6% than estimates amid higher opex. Net interest income (NII) grew 10% YoY and was focused on expectations.

Asset quality enhanced QoQ, while provisions fell and were slightly below prospects. The company increased from strategic initiatives and cyclical tailwinds in rural markets.

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