M&M Financial Services declines as Jefferies keeps ‘underperform’ tag, sees 34% downside

Shares of Mahindra & Mahindra Financial Services traded lower by over 2 percent in the morning session on January 3 after Jefferies maintained its ‘underperform’ rating on the stock.

The global research firm has retained its ‘underperform’ call with target of Rs 175 per share, a downside of 34 percent from the current market price.

At 9:44am, Mahindra & Mahindra Financial Services was quoting at Rs 235.75, down Rs 5.25, or 2.18 percent on BSE. It has touched an intraday high of Rs 247.05 and an intraday low of Rs 232.80.

The rural non-banking financial company in December said the business continued its momentum with disbursement of Rs 4,650 crore, a 67 percent YoY growth led by positive macro environment, the company said in an exchange filing.

In Q3 FY23 disbursements at Rs 14,450 crore registered a 80 percent growth YoY and with this, the year-to-date (YTD) disbursement stood at Rs 35,750 crore, up 95 percent YoY. Its collection efficiency (CE) was at 98 percent for December and that of Q3 was 95 percent, it added.

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According to the research firm, M&M Financial Services reported healthy disbursement growth of 22 percent QoQ. However, business assets rose 20 percent YoY, a tad softer than estimate, Jefferies said.

“Collection efficiency was stable YoY at 95 percent in Q3. The company expects stage-3 assets to be 6.2 percent in Q3 against 6.7 percent in Q2,” it said.

Domestic research and broking firm Motilal Oswal expects the company to deliver an RoE of ~12 percent over the medium term. “We find its current valuation of 1.7x FY24E P/BV reasonable from a risk-reward perspective and reiterate our buy rating on the stock,” it said.

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