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Sharekhan issued a “buy” rating for Mahindra & Mahindra Financial Services, setting a target price of Rs 340. This recommendation stems from the company’s strong financial performance and growth prospects. Mahindra & Mahindra Financial Services reported a profit after tax (PAT) of Rs 899 crore. Negligible credit costs drove this result due to a reversal of ECL provisions of Rs 430 crore. As a result, the stage-3 coverage fell to 50% from 59.5% quarter-on-quarter.
Although asset quality slightly deteriorated, Sharekhan remains cautiously optimistic given the tough macro environment. The company’s provision coverage ratio (PCR) is guided at 51-54%. Credit costs are expected to be slightly higher at around 1.3-1.5% on average assets in FY26E. The company reported improved disbursement momentum year-on-year, led by passenger vehicles (PVs) and tractors. This increase offset the slowdown in commercial vehicles (CVs). Therefore, Sharekhan expects mid-to-high teens loan growth going forward.
At the current market price (CMP), the stock trades at attractive valuations of 1.9x/1.7x/1.5x its FY2025E/FY2026E/FY2027E book value. Sharekhan maintains a buy rating with an upward revised target price of Rs 340. They cite favorable risk-reward and expected AUM growth at 17% CAGR over the next two years.
