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Mahindra & Mahindra Financial: Strong growth and stable asset quality
underpin robust performance
Mahindra & Mahindra Financial
(MMFS)
Banks/Financial Institutions
Strong growth and stable asset quality underpin robust performance. Mahindra
Finance (MMFSL) reported yet another quarter of strong performance: PAT was at
Rs1.02 bn, up 37% yoy and 1% above estimates. Loan growth was strong – up 52%
yoy and 12% qoq. Gross NPL ratio increased by 50 bps qoq to 4.6%, in line with
seasonal trends. The results reinforce our thesis that rural India continues to
demonstrate strong buoyancy and hence, MMFSL is well-placed to deliver superior
growth in 2012E. We tweak estimates, retain BUY with price target of Rs825.
Core growth strong
MMFSL reported core PBT of Rs2 bn, up 34% yoy - in line with estimates.
Strong growth in business. Loan growth was strong at 12% qoq. The disbursements mix
was broadly stable: Tractors at 22% of total, UVs at 27% of total. The share of CVs increased
to 10% from 6% in 1QFY11. The launch of Mahindra Navistar has resulted in higher business
for MMFSL in this segment. The company continued to finance about 10,000 Maruti cars
(about12% market share) in 1QFY12.
Auto industry to moderate in FY2012E. Our auto analyst expects growth in UVs and cars to
moderate to about 10% yoy in FY2012E; tractors will likely grow by 12% yoy. Higher growth in
semi-urban and rural areas and increasing product lines will drive faster growth at MMFSL.
Upside to our growth estimates. MMFSL reported 50% loan growth in FY2011; we are
modeling a moderation in business traction; we expect 26% loan growth for FY2012E and
FY2013E. The current trend, if continues, will provide an upside to our estimates; the asking
rate for next three quarters is clearly much lower. Monsoon continues to have sensitivity to the
earnings buoyancy in rural India; nevertheless, the underlying momentum is strong to support
near-term growth.
Margins decline in line with macro trends
MMFSL report NIM (as per KS calculations) of 10.1% as compared to 12.7% in 4QFY11 and
10.7% estimated by us. Rise in lending rates and a time lag in passing on the same to customers
has likely affected NIM for the quarter. We expect NIM to remain under pressure in the current
scenario; moderation in interest rates in 2HFY12E will likely provide comfort. Even seasonal trends
indicate NIMs expand in 2H due to improvement in collection efficiency.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Mahindra & Mahindra Financial: Strong growth and stable asset quality
underpin robust performance
Mahindra & Mahindra Financial
(MMFS)
Banks/Financial Institutions
Strong growth and stable asset quality underpin robust performance. Mahindra
Finance (MMFSL) reported yet another quarter of strong performance: PAT was at
Rs1.02 bn, up 37% yoy and 1% above estimates. Loan growth was strong – up 52%
yoy and 12% qoq. Gross NPL ratio increased by 50 bps qoq to 4.6%, in line with
seasonal trends. The results reinforce our thesis that rural India continues to
demonstrate strong buoyancy and hence, MMFSL is well-placed to deliver superior
growth in 2012E. We tweak estimates, retain BUY with price target of Rs825.
Core growth strong
MMFSL reported core PBT of Rs2 bn, up 34% yoy - in line with estimates.
Strong growth in business. Loan growth was strong at 12% qoq. The disbursements mix
was broadly stable: Tractors at 22% of total, UVs at 27% of total. The share of CVs increased
to 10% from 6% in 1QFY11. The launch of Mahindra Navistar has resulted in higher business
for MMFSL in this segment. The company continued to finance about 10,000 Maruti cars
(about12% market share) in 1QFY12.
Auto industry to moderate in FY2012E. Our auto analyst expects growth in UVs and cars to
moderate to about 10% yoy in FY2012E; tractors will likely grow by 12% yoy. Higher growth in
semi-urban and rural areas and increasing product lines will drive faster growth at MMFSL.
Upside to our growth estimates. MMFSL reported 50% loan growth in FY2011; we are
modeling a moderation in business traction; we expect 26% loan growth for FY2012E and
FY2013E. The current trend, if continues, will provide an upside to our estimates; the asking
rate for next three quarters is clearly much lower. Monsoon continues to have sensitivity to the
earnings buoyancy in rural India; nevertheless, the underlying momentum is strong to support
near-term growth.
Margins decline in line with macro trends
MMFSL report NIM (as per KS calculations) of 10.1% as compared to 12.7% in 4QFY11 and
10.7% estimated by us. Rise in lending rates and a time lag in passing on the same to customers
has likely affected NIM for the quarter. We expect NIM to remain under pressure in the current
scenario; moderation in interest rates in 2HFY12E will likely provide comfort. Even seasonal trends
indicate NIMs expand in 2H due to improvement in collection efficiency.
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