27 October 2020
2QFY21 Results Update | Sector: Financials
Mahindra & Mahindra Financial
Estimate change
TP change
Rating change
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
155.2 / 2.2
246 / 76
-4/16/-42
1663
CMP: INR126
TP: INR165 (+31%)
Buy
Lower provisioning leads to big PAT beat; Book largely flat
Mahindra Finance (MMFS)’s 2QFY21 PAT was up 21% YoY to INR3b (a 64%
beat and v/s INR1.5b QoQ). While PPoP was largely in line with est., lower
provisions of INR6.2b (v/s est. INR8b) led to the PAT beat.
PPoP grew 26% YoY to INR10.3b as opex declined 24% YoY to INR3.9b.
Decline in opex was largely driven by 46% YoY decline in other expenses.
Value of Assets (VOA) financed stood at INR54b (down 45% YoY).
In the
Auto/UV and Tractor segments, VOA was down just 22–23% YoY, and in
other segments, it was down 65–85% YoY. While we acknowledge the
slowdown in the CV segment, disbursements in PV/Tractor were lower
than expected.
The loan book grew 1% QoQ/YoY to INR644b. With the uptick seen in
2HFY21, management is confident of 8–10% YoY growth in AUM for FY21.
Auto / Utility Vehicle disbursements better v/s other segments
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
8.6
0.7
0.0
57.4
42.7
9.8
8.0
-46.0
125
8.9
29.3
1.3
7.3
23.4
15.8
1.0
0.0
2022E
61.8
45.0
11.2
9.1
13.9
132
GS3
9.2
30.8
1.4
7.0
23.4
13.9
1.0
1.4
ratio improves sequentially to 7.03%, but ECL declines
The Gross Stage 3 ratio improved ~215bp QoQ to 7.03%. The company
reduced its PCR to 35% from 40% in 1QFY21. Adjusted for the impact of
the SC order on NPL classification, GS3/NS3 would have been
7.53%/4.97%.
MMFS wrote off INR10.6b during the quarter v/s INR5.2b YoY. Also, given
the reduction in PCR (as mentioned above), total ECL decreased to 4.9%
v/s 5.5% in 1QFY21 (3.3% in 2QFY20).
Calc. yield on loans improved 65bp YoY to 16.1%, while cost of funds
declined 75bp YoY to 7.9%.
Mahindra Rural Housing Finance:
Disbursements remained muted at
INR1.1b. PBT/PAT increased 36%/100% YoY to INR827m/INR574m.
Collection efficiency (CE) for Sep came in at 82% (normally 87–88%). 250–
275k customers who availed moratorium did not pay in September. Do not
expect more than 100–150k customers (of 2m totally) to request
restructuring (~INR60b).
During the quarter, the company made COVID-related provisions of
INR4.34b. Taxi, School Bus, HCV, and tourism-related vehicle segments
remain pressured. These comprise 7–8% of the portfolio.
Other highlights
Shareholding pattern (%)
As On
Sep-20 Jun-20
Promoter
52.2
51.2
DII
12.5
13.1
FII
21.7
23.9
Others
13.7
11.9
FII Includes depository receipts
Sep-19
51.2
15.3
25.6
8.0
Highlights from management commentary
Valuation and view
Disbursements at 55% of YoY levels improved from the prior quarter, yet came
in below expectations, given the strong trends in OEMs. While we expect an
uptick in 2H, overall loan growth should be in the mid-single digits. While asset
quality numbers are encouraging, we believe the true impact of the lockdown
would reflect only in 2HFY21. We increase our FY21 EPS estimate by 8% given
lower credit cost. Our FY22 EPS estimate is largely unchanged. While RoE is
currently subdued at 7%, it should reach 10% in FY23E. Maintain Buy, with TP
of INR165 (1.2x Sep’22E BVPS).
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.
14
Oswal
2020
1
Motilal
January
research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.