Mahindra and Mahindra Financial Services: Target Price Set at Rs 396 by Anand Rathi
Mahindra and Mahindra Financial Services Sees Strong Growth Prospects
Mahindra and Mahindra Financial Services (MMFS) has seen a significant surge in growth, driven by a healthy net interest income (NII) growth of 13% year-over-year (y/y) and 4% quarter-over-quarter (q/q), surpassing estimates. This growth has been further fueled by a 38% y/y increase in profit before provisions and taxes (PPoP).
Maintaining BUY Rating
Despite trimming our estimates by 3-6% for FY27 and FY28 respectively on lower net interest margin (NIM) assumptions, we maintain a BUY rating on the stock with a target price (TP) of Rs396. This TP is based on a two-stage dividend discount model (DDM). At our TP, the stock would trade at 1.7x FY28e price-to-book value (P/BV) for a 2% return on assets (RoA) in FY28e.
Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data
Inexpensive Valuations
The stock trades at relatively inexpensive valuations of 1.4/1.3x P/BV on FY27 and FY28e, respectively. Our target price of Rs396 is approximately 1.9/1.7x P/BV multiples of FY27 and FY28e, respectively.
| Comparison | FY27e | FY28e |
|---|---|---|
| Price-to-Book Value (P/BV) | 1.4x | 1.3x |
| P/BV Multiples | 1.9x | 1.7x |
Investor Takeaway
Investors should consider buying Mahindra and Mahindra Financial Services with a target price of Rs 396.
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