MOSL: MAHINDRA FINANCIAL SERVICES (Buy)-Operating performance strong-Strengthening the balance sheet
​Mahindra Financial Services: Operating performance strong; Strengthening the balance sheet
(MMFS IN, Mkt Cap USD3.5b, CMP INR399, TP INR459, 15% Upside, Buy)
- Mahindra & Mahindra Financial Services (MMFS) had a strong quarter on the operating front. Value of assets financed increased 16% YoY in 1QFY18 – the fourth consecutive quarter of 15%+ YoY growth. This comes after a span of over 12 quarters of sluggish growth, caused by a variety of external factors. Management expects strong growth to sustain or even improve.
- GNPL ratio increased 150bp QoQ, but declined 20bp YoY to 10.5%. The sequential increase, which is seasonal, is much lower than that witnessed in the past three years. Asset quality data from the past 10 years suggest that in a good economic cycle, 4Q-to-1Q GNPL increase is ~50-100bp, while in a bad cycle, it goes to as high as 250+bp.
- The company incurred provisioning cost of INR834m, based on its assessment of underlying collateral for NPLs, on which 100% provisioning has been made. As a result, PCR was largely stable at 60-62%. The sequential PCR decline of a mere 130bp is the lowest in the past 11 years (average decline of 600bp). We view this shoring-up of provisions as a positive sign as it strengthens the balance sheet, despite the negative impact on near-term profitability.
Mahindra & Mahindra Financial Services is a non-banking financial company, provides financial products and services in the rural and semi-urban markets in India. Co. offers vehicle financing for auto and utility vehicles, tractors, cars, commercial vehicles, two wheelers, three wheelers, and construction equipment; pre-owned vehicle financing for cars, multi-utility vehicles, tractors, and commercial vehicles; housing finance for new houses, and house renovation and improvements; and SME financing services, including project finance, equipment finance, and working capital finance. Co. also provides personal loans.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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