 "M&M Finance stock drops 8% on weak Q2 numbers; What should investors do?")
Mahindra & Mahindra Financial Services (M&M Finance) shares lost 7.8 per cent on Wednesday and registered an intraday low of Rs 259.35 per share on the BSE. The stock declined after the company reported weak Q2FY25 results.
At around 10:15 AM, M&M Finance shares were down 4.01 per cent at Rs 270.25 per share. In comparison, the BSE Sensex was up 0.21 per cent at 80,391.42 around the same time. The market capitalisation of the company around the time stood at Rs 33,384.02 crore.
For the second quarter, M&M Finance reported a net profit of Rs 369 crore as compared to Rs 235 crore a year ago, implying a rise of 57 per cent year-on-year (Y-o-Y).
Likewise, total income rose by 19 per cent to Rs 1,991 crore, while the net interest income (NII) of the non-banking financial company (NBFC) increased by 19 per cent Y-o-Y to Rs 1,963 crore from Rs 1,646 crore.
However, the company's NII margin for the quarter under review remained flat at 6.5 per cent and the cost of funds rose marginally to 6.5 per cent in Q2 FY25 from 6.4 per cent last year.
During the second quarter, the company’s disbursements slipped by 1 per cent Y-o-Y to Rs 13,162 crore, from Rs 13,315 crore. Growth in various Wheels segments—such as passenger vehicles and commercial vehicles—slowed down.
The gross non-performing assets (GNPA) of M&M Finance as of September 30, 2024, rose to 3.83 per cent from 3.56 per cent as of June 30, 2024, while net non performing assets (NPA) increased to 1.59 per cent from 1.46 per cent.
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"M&M Finance continued to report weak asset-quality performance, with a 30 basis points (bps) and 20 bps quarter-on-quarter (Q-o-Q) rise in gross stage-2 and gross stage-3, respectively," a report by Kotak Institutional Equities stated.
What should investors do with M&M Finance?
Kotak Institutional Equities retained its 'Add' rating on the stock, while saying that the company's valuations are not demanding. It maintained the target price of Rs 320 per share.
JM Financial also maintained its 'Buy' rating on the stock with a target price of Rs 330 per share for 12 months.
"We cut our earnings estimates by 15 per cent/20 per cent for FY25/FY26 and now build in return on assets (ROAs) of 1.9 per cent/2.2 per cent for FY25E/FY26E, valuing the parent at 1.6x FY26E Book Value," the report noted.
InCred Equities also retained a 'Buy' rating on M&M Finance stocks for a target price of Rs 330 per share.
In the past one year, M&M Finance shares have gained 3.1 per cent, compared to the BSE Sensex's rise of 24 per cent during the period.