Q4FY21 Result Update - M&M Financial Services - ICICI Direct

Mahindra & Mahindra Financial Services (MMFS) reported a mixed set of Q4FY21 numbers wherein topline growth improved on account of better margins but lower disbursements led to slower AUM growth. NII increased 12.2% YoY, 9.2% QoQ to Rs. 1511 crore on the back of improvement in NIMs (calculated) that were up 63 bps QoQ, 35 bps YoY to 7.4% owing to slightly better asset quality and liquidity management. Employee cost increased 32% YoY to Rs. 282 crore, mainly on account of lower base effect due to reversal of provisions on incentives YoY. Credit cost declined sequentially but remained elevated at ~108 bps of AUM as the management created overlay provisions of Rs. 1320 during the quarter. The management wrote off loans worth Rs. 690 crore using the same. Thus, MMFS posted PAT of Rs. 150 crore vs. loss of Rs. 274 crore QoQ.

Valuation & Outlook

MMFS' business depends on how rural economy shapes up and second wave of Covid-19 has brought new challenges to it. The management has indicated a cautious approach in the next two quarters. Hence, we believe recovery could be slower and meaningful improvement in return ratios could be delayed. RoE expected to reach modest levels of ~7% by FY23E. Thus, we downgrade our rating on the stock from HOLD to REDUCE with a revised target price of Rs. 160/share (earlier Rs. 140). We roll over to FY23E and value core business at ~1.1x FY23E ABV and ~Rs. 16 as value for subsidiaries.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_MMFS_Q4FY21.pdf

Shares of MAHINDRA & MAHINDRA FINANCIAL SERVICES LTD. was last trading in BSE at Rs.165 as compared to the previous close of Rs. 163.2. The total number of shares traded during the day was 627090 in over 5149 trades.

The stock hit an intraday high of Rs. 167.6 and intraday low of 163.75. The net turnover during the day was Rs. 103735384.

Source : Equity Bulls

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