**M&M Financial– Q3 FY20 (Cons- UnAudited)**
CMP: 352
Total revenue from ops at 3,046 Cr
2,692 Cr (13.1%) YoY 2,915 Cr (4.40%) QoQ
YTD 9 month revenue 8,782 Cr Vs. 7,492 Cr (17.22%)
Net Profit of 474.9 Cr
409.4 Cr (15.89%) YoY 263.6 Cr (80.21%) QoQ
YTD 9 month profit: 847 Cr Vs. 1,166 (-27.28%)
EPS (in Rs.) 7.66
6.47 YoY | 4.24 QoQ
YTD 9 month EPS 13.64 vs. 18.52
Gross NPA: 5,773 Cr Vs. 5,064 Cr Vs. 4,070 Cr
Gross NPA: 8.5% Vs. 8.3% in YoY Vs. 7.9% in QoQ
Net NPA: 4,451 Cr Vs. 3,703 Cr Vs. 3,290 Cr
Net NPA: 6.7% Vs. 6.2% in YoY Vs. 6.4% in QoQ
View: Result is below expectation. However YoY total income increased and PAT also increased due to reduction in current Tax. Further Gross NPA and Net NPA also increased in this quarter.
**Business Updates & Highlights**
PBT at Rs.629 Crores during the quarter ended December 31, 2019, as against Rs.665 Crores during the corresponding quarter last year, a decline of 5% over the same period previous year. PBT stood at Rs.1,296 Crores during the nine-month period ended December 31, 2019, as against Rs.1,799 Crores during the corresponding period last year, a decline of 28% over the same period previous year.
During the period ended December 31, 2019, the Company’s customer base has crossed 6.6 Million.
The Total value of assets financed for the nine-month period ended December 31, 2019, was Rs.34,591 Crores as against Rs.36,261 Crores during the same period previous year, decline of 5%. AUM Includes Auto / Utility – 27%, Tractor – 17%, Cars – 21%, Commercial Vehicle – 18%, Pre owned vehicle – 10% and SME – 7%.
Loan book in 9M ending FY20 is around INR 65,400 Cr Vs. 58,267 Cr in 9MFY19.
**Subsidiaries business**
Mahindra Insurance Brokers (MIBL): MIBL registered income at Rs.91.2 Crores as against Rs.81.8 Crores, registering a growth of 11% over the same period previous year. The Profit Before Tax (PBT) registered was Rs.22.2 Crores as against Rs.26.1 Crores, a decline of 15% over the same period previous year.
Mahindra Rural Housing Finance Limited (MRHFL) MRHFL registered Income at Rs.393.6 crores as against Rs.393.4 crores over the same period previous year. The Profit Before Tax during the quarter ended December 31, 2019, was Rs.115.2 Crores as against Rs.123.7 Crores, a decline of 7% over the same period previous year.
Mahindra Asset Management Company Private Limited (MAMCPL): MAMCPL earned revenues of Rs.4.7 Crores as compared to Rs.4.4 Crores in the same period previous year. The company incurred a loss of Rs.10.4 Crores compared to a loss of Rs.14.0 Crores during the same period previous year.
**Financial**
ROE and ROCE is around 14% and 12% respectively and book value per share is around INR 181 and share is currently trading at 1.9x of its book value. Company is currently trading at annualized PE of around 18 which is fair as per Industry benchmark. Promoter holding in the company is around 51.1%, FIIs and Mutual fund hold around 24.9% and 15.3% in the company. 9 months ending debt equity ratio is 5.28:1. Capital adequacy ratio is around 19.6% Vs. 19.4% in YoY and 20.3% in QoQ. Return on Net worth (RONW) is 8.3% Vs. 13% in YoY Vs. 15.2% in QoQ.
**Share View:** Share price high 452 (52 week) and now 352. Mahindra & Mahindra Financial Services Limited (“MMFSL”) is a subsidiary of Mahindra and Mahindra Limited, India’s largest tractor and utility vehicle manufacturer. MMFSL one of India’s leading non-banking finance companies focused in the rural and semi-urban sector, is the largest Indian tractor financier. Primarily in the business of financing purchase of new and pre-owned auto and utility vehicles, tractors, cars, commercial vehicles, construction equipment and SME Financing. Has 1,326 offices covering 28 states and 5 union territories in India, with over 6.68 million vehicle finance customer contracts since inception.
NPA increasing on YoY and QoQ, Pressurized on bottom line due to business impact of Auto finance segment. Short term outlook is bearish can take the support of INR 315/305. Long term investor can continue with the company with target price of INR 390.
Opportunities: Brand value of Mahindra Group. India Ratings has assigned AAA/Stable, CARE Ratings has assigned AAA/Stable, Brickwork has assigned AAA/Stable and CRISIL has assigned AA+/Stable rating to the Company’s long term and subordinated debt. Highly diversified business in various segments.
Risk: Auto finance business risk continuously showing stress on this segment. Higher NPAs on every quarter. NBFC business is under pressure after IL&FS fiasco.
Disclaimer: Views are shared based on market research and study and personal in nature. Others can take the different view and opinions. Please do the thoroughly study before enter or exit the shares.
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