Mahindra Finance (MMFS) Q2 FY21 - 'An in-line performance' - YES Securities

- An in-line quarter with strong PPOP growth of 26% yoy, underpinned by AUM growth of 12% yoy (flat qoq), NII growth of 8% yoy (depressed by excess liquidity carried) and controlled opex (down 24% yoy on structural initiatives).

- Gross Stage-3 exposure (GNPL) on reported basis declines 23% qoq to stand lower at 7% - the pool of SC order benefitted accounts not large at 0.5% of loan assets, and the co. has made and carries a 45% prov. on them - otherwise on reported stage-3, the cover was maintained at 35%

- MMFS also raised cover of Stage 1 & 2 assets to 2.3% (adjusted for quantum of SC order related pool and prov. on it) by making additional prov. based on management overlay.

- Value of assets financed (disbursements) during Q2 was 55% higher than Q1 FY21, however still lower 45% on yoy basis - business traction in Auto/UV, Tractors and Cars exhibited strong recovery on sequential basis

- Though Q2 FY21 results are supportive of the stock, management commentary on flow forward into Stage-2 and Stge-3 and potential restructuring during Q3 FY21 will hold the key for sustainable valuation re-rating. At present, the valuation is undemanding at 1.2x FY22 P/ABV. We have a BUY rating.

Shares of MAHINDRA & MAHINDRA FINANCIAL SERVICES LTD. was last trading in BSE at Rs.130.85 as compared to the previous close of Rs. 134.7. The total number of shares traded during the day was 586991 in over 6335 trades.

The stock hit an intraday high of Rs. 135.55 and intraday low of 128.55. The net turnover during the day was Rs. 77157801.

Source : Equity Bulls

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