20 July 2020
1QFY21 Results Update | Sector: Financials
Mahindra & Mahindra Financial
Estimate change
TP change
Rating change
Motilal Oswal values your support in the
Asiamoney Brokers Poll 2020 for India
Research, Sales and Trading team. We
request your ballot.
CMP: INR230
TP: INR320 (+39%)
Buy
Controlled opex leads to PPoP beat; Credit costs elevated
Mahindra Finance (MMFS) reported 1QFY21 PAT of INR1.6b (up 128% YoY;
down 29% QoQ), a 3% miss. While PPoP beat our estimates by 25%,
higher-than-expected provisions at INR8.4b led to the modest PAT miss.
The board approved a 1:1 rights issue at INR50 per share, amounting to
INR30.89b as of 23
rd
July 2020 (record date). As per our calculations,
while FY21 networth increases ~25%, BVPS declines ~35% to INR125.
While the value of assets financed declined sharply, we note the decline in
Tractors was much lower (35% YoY).
Operating expenses declined 38% YoY to INR3.5b largely driven by 47%
YoY decline in other expenses to INR0.9b.
Around half of the opex cut is
sustainable, as per management.
Gross Stage 3 assets increased 75bp QoQ to 9.2% due to slippages from
tractor owners who had not availed moratorium.
The company took INR4.8b COVID-19 provisions during the quarter, vis-à-
vis INR5.7b COVID-19 provisions in 4QFY20.
The company increased
provision coverage to 40% QoQ from 31%. ECL% increased to 5.5% v/s
4.4% in 4QFY20 and 3.6% in 1QFY20.
~40% of customers who availed moratorium are paying full installments.
Around 48% of customers are currently in moratorium.
MMFS is comfortable on the ALM front, with liability repayments of
INR54.7b in 2QFY21, against a cash balance of INR85b.
Mahindra Rural Housing Finance:
There were nil disbursements during the
quarter. PBT/PAT increased 38%/66% YoY to INR567m/INR477m. GS3%
increased by ~37bp to 15.5%, while NS3% declined 85bp to 9.9%.
Collection efficiency in June was 75% of the total demand. This has
improved in July.
48% of total customers and 30% of Tractor customers
are under moratorium currently.
30–40% taxi aggregators are returning to activity, but recovery is slow.
Month-on-month improvement in disbursements and collections is
encouraging; however, its sustenance is the key monitorable. Within its
product mix, Tractors, Entry-level Cars, and LCVs are likely to do well, while
M&HCV and Taxi Aggregator are likely to witness slow recovery.
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
MMFS IN
615
141.8 / 1.7
403 / 125
24/-25/-34
1316
Tractor disbursements better v/s other segments; Opex under control
Financials & valuations (INR b)
Y/E March
2020 2021E
NII
PPP
PAT
EPS (INR)
EPS Gr. (%)
BV/Sh.(INR)
Ratios
NIM (%)
C/I ratio (%)
RoA (%)
RoE (%)
Payout (%)
Valuations
P/E (x)
P/BV (x)
Div. Yield (%)
51.1
34.0
9.1
14.7
-41.8
185
8.3
37.3
1.3
8.3
0.0
15.6
1.2
0.0
57.5
42.8
9.1
7.4
-49.9
125
9.2
29.1
1.2
6.8
23.4
31.2
1.8
0.0
INR4.8b COVID-19 provisions in the quarter;
comfortable
on liquidity
2022E
55.7
39.2
11.0
8.9
21.3
132
9.2
33.4
1.5
7.0
23.4
Other highlights
25.7
1.7
0.8
Highlights from management commentary
Shareholding pattern (%)
As On
Mar-20 Dec-19
Promoter
51.2
51.2
DII
15.6
15.4
FII
24.3
25.3
Others
8.9
8.2
FII Includes depository receipts
Mar-19
51.2
13.6
27.2
7.9
Valuation and view
Research Analyst: Alpesh Mehta
(Alpesh.Mehta@MotilalOswal.com) |
Piran Engineer
(Piran.Engineer@MotilalOswal.com)
Nitin Aggarwal
(Nitin.Aggarwal@MotilalOswal.com) |
Divya Maheshwari
(Divya.Maheshwari@motilaloswal.com)
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
14 January 2020
1