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Buy M&M Financial Services, target Rs 544

We expect a target of Rs 544 by FY19 end (P/BV of 3.2x on estimated FY19E Book Value of Rs 170) implying an upside of 17 percent.



We believe Mahindra & Mahindra Financial Services is cheap as compared to other listed NBFCs. The company improved its Return on Assets significantly from 1 percent in FY17 to 1.9 percent in FY18. With improving rural cash flows, recovery from NPAs would help the company to improve its ROA of 2.6-2.8 percent by FY20.
The management is optimistic on improving rural cash flow which should lead to growth of 18-20 percent in FY19 across segments.
NPAs in the rural housing is expected to reduce in coming quarters as Maharashtra has improved in cash flow and which will translate towards recoveries. PCR stood at 58.1 percent in FY18. We expect a target of Rs 544 by FY19 end (P/BV of 3.2x on estimated FY19E Book Value of Rs. 170) implying an upside of 17 percent.
MORE WILL UPDATE SOON!!
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