M&M Financial Services hits 52-week high on a strong November; brokerages expect further upside

Mahindra & Mahindra Financial Services’ share price was up more than 4 percent in the morning session on December 5 and touched a 52-week high of Rs 239.35 after the company reported a 75 percent growth in disbursements in November.

“The business continued its momentum with the disbursement of approximately Rs 4,500 crore delivering a 75 percent YoY growth on the backdrop of a  positive macro environment, the company said in an exchange filing.

The year-to-date disbursement at approximately Rs 31,050 crore registered a year-on-year growth of 99 percent. Healthy disbursement trends led to a strong gross asset book of approximately Rs 76,300 crore, growing around 3.4 percent over September 2022, the filing said.

The collection efficiency (CE) was at 96 percent for November 2022 against 94 percent in the year-ago period. Stage 2 assets as at November end were down sequentially and are estimated below 9 percent, while Stage 3 assets remained stable at lower than 7 percent at month end, it added.

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The company expects further improvement in stage 2 and 3 assets in December. Gross Non-Performing Assets (GNPA) are estimated to be higher than Stage 3 asset by around Rs 1,200 crore, reconfirming the management belief that no additional provisions may be required over and above the Expected Credit Loss (ECL) provision for FY23, the report said.

At 10.35 am, Mahindra & Mahindra Financial Services was quoting at Rs 239.10, up Rs 10.10, or 4.41 percent, on BSE. It touched an intraday high of Rs 239.35 and an intraday low of Rs 228.50.

It was trading with volumes of 339,089 shares, compared to its five-day average of 127,316 shares, an increase of 166.34 percent.

Brokerage calls

Global research firm CLSA has a “buy” call on the stock, with a target of Rs 260 a share, an upside of 8 percent from the current market price.

The brokerage firm said the disbursement traction remained healthy and collections were strong, CNBC-TV18 said.

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Stage-2 assets declined, whereas Stage-3 were largely stable, the report said. “Management expects both to improve in December due to seasonality. The company has made many on-ground changes and is witnessing the impact of that in its numbers. Only negative surprises that could come in forthcoming results are NIMs or Opex,” the report quoted the brokerage as saying.

Morgan Stanley has an “overweight” call with the target at Rs 275 a share, an upside of 15 percent from the current level. “Disbursements and collections remained strong in November. November business update was strong aided by macro tailwinds, as per management. Collection efficiency in November rose MoM and YoY,” it said.

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