Whalesbook
Earnings Forecasts Trimmed
Prabhudas Lilladher has cut its earnings forecasts for Mahindra and Mahindra Financial Services (MMFS) by 6-7% for FY27 and FY28. The brokerage cited expectations of slower growth and increased borrowing costs due to higher bond yields.
Disbursements and AUM Post Solid Gains
However, the report noted strong Q4 performance, with disbursements rising 11% year-on-year. Key growth areas included tractors, pre-owned commercial vehicles (CVs), and passenger vehicles (PVs). Assets Under Management (AUM) grew 12% year-on-year to ₹1,341 billion. Prabhudas Lilladher forecasts AUM to continue growing at 13% in FY27 and 13.5% in FY28.
Margins Expected to Hold Steady
Despite higher funding costs, MMFS's margins are expected to remain stable in FY27. This is supported by a favourable business mix and an anticipated rise in fee income. Operational expenses are also projected to stay in check as the company invests in business transformation and diversification.
Asset Quality and Target Price Detailed
Asset quality metrics have improved but remain under close watch. Prabhudas Lilladher models credit costs at 1.7% for FY27 and 1.6% for FY28. The firm values MMFS's standalone business at 1.3 times its FY28 estimated Price to Adjusted Book Value (P/ABV). Applying a 25% holding company discount to its Sum-of-the-Parts (SOTP) valuation yields the ₹325 target price.