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Motilal Oswal
M&M Finance (Buy)
Target: ₹320
CMP: ₹153.95
Mahindra & Mahindra Financial has reported Q1FY21 profit after tax (PAT)of ₹160 crore (up 128 per cent y-o-y ; down 29 per cent q-o-q), a 3 per cent miss. While PPoP (pre-provision operating profit) beat our estimates by 25 per cent, higher-than-expected provisions at ₹840 crore led to the modest PAT miss. The board approved a 1:1 rights issue at ₹50 a share, amounting to ₹3,089 crore as of July 23 (record date).
As per our calculations, while FY21 networth increases approximately 25 per cent, BVPS declines about 35 per cent to ₹125.
Month-on-month improvement in disbursements and collections is encouraging; however, its sustenance is the key monitorable. Within its product mix, tractors, entry-level cars, and LCVs are likely to do well, while M&HCV and taxi aggregator are likely to witness slow recovery.
According to the management, collection efficiency in June was 75 per cent of the total demand. This has improved in July. About 48 per cent of total customers and 30 per cent of tractor customers are under moratorium now; and 30–40 per cent taxi aggregators are returning to activity, but recovery is slow.
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