Brokerages have offered mixed views on Mahindra & Mahindra Financial Services (M&M Fin) after its Q3 FY25 results, highlighting slippages, lower provisions, and potential credit cost volatility. HSBC has a ‘Buy’ call, while Morgan Stanley (MS) maintains ‘Equal-Weight’ and Nuvama remains ‘Hold’ on the stock.
Morgan Stanley on M&M Finance: Maintains ‘Equal-Weight’, target ₹285
Morgan Stanley has retained its ‘Equal-Weight’ rating, highlighting concerns over rising slippages and lower provision coverage.
- Stage 3 coverage fell from 59.5% to 50%, leading to a PAT beat against estimates.
- However, slippages are rising, and provision coverage ratio (PCR) guidance is at 51-54%.
- FY26-27 credit costs could be higher than expected, averaging 1.3-1.5%.
- The firm trimmed FY26 EPS estimates, even with a PCR assumption of less than 45%.
HSBC on M&M Finance: Maintains ‘Buy’, target ₹320
HSBC remains bullish on M&M Finance, maintaining a ‘Buy’ rating on the back of provision releases and stabilizing trends.
- Q3 FY25 operating profit saw a slight miss, but net profit beat expectations due to release of provisions.
- Operational trends are stabilizing, although there was a slight QoQ increase in Gross Stage 3 assets.
- HSBC believes the stock remains attractive at current valuations, given gradual improvement in asset quality.
Nuvama on M&M Finance: Maintains ‘Hold’, target ₹280
Nuvama has a cautious stance on M&M Finance, keeping a ‘Hold’ rating and highlighting concerns over credit cost volatility.
- ECL (Expected Credit Loss) refresh led to a sharp dip in credit cost, with PCR dropping to 50%.
- Management reaffirmed guidance of 1.3-1.5% credit cost and mid-to-high teen AUM growth for FY26.
- ECL reset is already factored in, but credit costs could remain volatile going forward.
Market Outlook
The stock has seen divergent views, with HSBC maintaining a ‘Buy’, while Morgan Stanley and Nuvama remain cautious. The key concerns revolve around slippages, provision coverage, and credit cost volatility, which could impact M&M Finance’s near-term financial performance.
Disclaimer
This article is for informational purposes only and does not constitute financial advice. Investors should conduct their own research or consult professionals before making investment decisions. Business Upturn is not responsible for any investment outcomes based on this report.
