Shares of M&M Financial Services Ltd. fell as much as 9% on Thursday, October 22, even as global investment banking firms are positive post the company’s second quarter results. The stock is the top loser on the Nifty 500 index.
While CLSA has an “outperform” rating, Citi, Nomura and HSBC have “buy” ratings even as the latter two have cut their target prices.
CLSA Retains Buy On M&M Finance
CLSA has an “outperform” rating with a target price of ₹405 per share on M&M Financial Services, indicating an upside of 35.9% from its previous close.
It said the company delivered a another strong quarter, with its pre-provisional operating profit (PPOP) and profit after tax (PAT) beating estimates by 5% and 12%, respectively, driven by higher fees and lower credit costs. The PPOP growth was healthy at 20% from last year.
Calculated net slippages declined 15 basis points from last year and the stage 2 + 3 loans ratio declined to a multi-year low, CLSA said.
Disbursement growth has accelerated over the past two quarters and should translate to stronger assets under management (AUM) growth in the coming quarters, the investment banking firm said.
That said, a largely fixed-rate loan book and 50% floating rate borrowings could put pressure on spreads in a rate hike cycle, CLSA added.
Citi Sees 40% Upside For M&M Finance
Citi has a “buy” rating on M&M Finance with a target price of ₹420 per share, indicating an upside of 40.9% from its previous closing price.
Despite a 30 basis points net interest margin (NIM) compression, the contained credit costs, fee/assets of 1.6%, and slight opex moderation sustained return on assets at 2.2%, with PAT increasing 55% from last year, surpassing Citi’s estimates.
The company navigated the volatility in the first half of FY27 with well augmented scorecards, portfolio monitoring and collections, Citi said.
It said gross stage 3 (GS3) and GS2 improved to 3.42% and 4.7%, respectively on higher capital expenditure of 97%.
Loan spreads narrowed 30 basis points as its growth tilted toward trade advances and lifted liquidity to 10% of the balance sheet size, Citi said.
M&M Financial’s disbursements rose 22% from the previous year, broad-based across passenger vehicles rising 28%, pre-owned vehicles up 15%, commercial vehicles up 16% and tractors up 13%. This drove AUM growth by 15%.
Notwithstanding rural headwinds, resilient the first half of FY27’s credit costs reinforce management’s confidence in retained guidance, Citi added.
Nomura Also Sees Close to 40% Upside For M&M Financial
It has a “buy” rating and has cut its target price to ₹400 from ₹415. This indicates an upside of 39.3% from its previous close.
It said M&M Financial’s asset quality is holding up well. Its net profit was up 14% compared to estimates. Nomura has trimmed its net profit estimates by 1%-9% over FY27-29.
It added that the insurance distribution reform is a risk.
HSBC Cuts Price Target on M&M Finance
It too has a “buy” rating and has cut its target price to ₹340 from ₹390.
It said the company reported a healthy operating performance driven by higher fee income and lower credit cost led to beat in its second quarter estimates.
It has tweaked its FY27-29 earnings per share (EPS) estimates to reflect higher AUM growth outlook but the rising pressure on NIM and fees.
HSBC has lowered its target price at an implied valuation at 1.5 times its FY28 estimated book value per share (BVPS) from 1.7x.
M&M Finance shares are Buy Or Sell?
Of the 38 analysts who have coverage on the M&M Financial Services stock, 28 have a “buy” rating, eight have a “hold” rating and two have a “sell” rating.
Shares of M&M Finance are trading 6.6% lower after looking to recover from lower levels at ₹278.3. The stock is down 21% in the last one month, taking its year-to-date loss down to 31%.
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