Emkay Global Financial has given Hold recommendation for Mahindra Finance with a target price of Rs. 150 in its research report issued on Jul 27, 2021

Emkay Global Financial’s report on Mahindra Finance

MMFS reported a net loss of Rs1.53bn in Q1FY22 (Emkay estimate: Rs2.4bn profit) due to weak growth momentum and a surge in provisions. MMFS increased provisions by 234.5% yoy/218.1% qoq to Rs28.2bn amid deteriorating asset quality. Management made an additional overlay of Rs3.9bn, resulting in a total management overlay of Rs27.1bn. Disbursements remained weak at Rs38.7bn (+42% yoy, -35% qoq). AUM declined ~3.3% qoq (-3% yoy) to Rs789.6bn. Demand remains weak across segments, but management is optimistic about growth in H2FY22 with the normalization in activities. However, any signs of the third Covid wave could weigh on growth. GNPA increased to ~15.5%, mainly contributed by cab aggregators, buses, and MHCV portfolios. The trend in recoveries has been improving since Jun’21 and management remains confident of recoveries and provision reversals by Q4FY21. However, considering past experiences and current restructured book (~2.8% of AUM), we remain cautious.

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