Buy Mahindra Finance; target of Rs 370: Emkay Global Financial

Moneycontrol • 10 days ago

Original source

Key Investment Pillars

  • Contained credit cost: MMFS delivered a good 2QFY27, with PAT up 55% yoy to Rs8.82bn, driven by contained credit cost of 1.6% and moderating opex.
  • Improving asset quality: Asset quality continues to improve, with GS2+GS3 at 8.1% and PCR at 56.6%.
  • Margin protection: Management plans to protect NIM through faster repricing of the floating non-wheels book, higher rates on new wheels loans, selling down PSL assets, and fee levers.
  • Growth drivers: Wheels should grow slightly ahead of the industry, with SME, PL, and mortgages driving alpha.

Thesis Validation Checklist

  • AUM growth: 16-18% retained as a medium-to-long term target.
  • Credit cost: 1.3-1.7% guidance range.
  • NIM: Above ~7% to result in ROA of 2.2-2.5%.
  • COF: Upward trajectory due to optimization largely achieved in FY26.
  • Drought impact: Tractor stress will be clearer once half-yearly installments fall due after harvests. Investors should watch for these signals over the next ~12 months to see if the thesis is playing out.