Mahindra & Mahindra Financial Services Ltd CMP: Rs 281 Target Price: Rs 302 Recommendation: HOLD Signs of improvement visible; valuations leaves limited upside Mahindra & Mahindra Financial Services Ltd (MMFS) reported performance broadly in line with expectation. PAT declined 6.4% YoY on account of higher provisions. NII witnessed improvement led by growth in AUM and control over slippages. Asset quality deterioration was arrested as management continued to focus on improving collections. Going forward, growth is expected to witness slowdown as management intends to focus on recoveries rather than going aggressive on growth. Management has guided for improvement in asset quality in H2FY15E. We expect PAT to grow at a CAGR of 13.9% over FY14-FY16E. At CMP, MMFS is trading at 17.27x FY15E and 13.75x FY16E EPS and 3.12x FY15E and 2.75x FY16E P/ABV. Though we like MMFS from a long-term perspective; we believe that current rich valuations leaves limited upside. We maintain our HOLD rating on the stock with target price of 302; indicating an upside of 7.4% from current levels.
Posted on: Mon, 27 Oct 2014 07:24:33 +0000
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