Predicting the Future: M&M Finance Share Price Forecast

Motilal Oswal Securities recommended to buy MMFS, here posting the summarized overview of the information regarding Mahindra & Mahindra Financial Services analysis on the company’s strategic initiatives and transformation efforts:

Overview:

• MMFS has experienced volatile operating performance and weak asset quality in the past.
• The management is implementing strategic initiatives to transform the company and make it more robust.

Strategic Priorities:

• MMFS has aligned its key performance indicators (KPIs) with strategic priorities, including expanding its presence, leveraging technology for efficiency, developing new products, and enhancing processes.
• They are investing in new capabilities and advanced technology to reduce volatility in operating performance.

Performance Highlights:

• In the last fiscal year, MMFS improved its market shares in the tractor, Mahindra Auto, and non-Mahindra financing segments.
• Improved rural cash-flows are expected to support demand sentiment in FY24.
• The company is increasing its presence in the used vehicle segment.

Transformation:

• The transformation of MMFS is ongoing. While blended net interest margins (NIM) may stabilize, technology transformation is expected to improve operating efficiency and reduce credit costs.
• MMFS is well-positioned in rural and semi-urban customer segments.

Financial Projections:

• The report models a Compound Annual Growth Rate (CAGR) of 19-20% in Assets Under Management (AUM) and Profit After Tax (PAT) over FY23-FY25.
• Expected Return on Assets (RoA) and Return on Equity (RoE) for FY25 are 2.3% and 15.4%, respectively.
• The report recommends a “BUY” rating on the stock with a target price of INR 350.

Transformation Initiatives:

• MMFS is implementing various strategies, including scaling up new growth engines, diversifying customer segments, and adopting digital capabilities.
• The transformation aims to enhance customer experience, reduce turnaround time, and improve efficiency.

Demand Momentum:

• Anticipates sustained demand momentum in the vehicle financing sector due to government initiatives and higher infrastructure spending.
• MMFS is diversifying into non-vehicle segments to ensure consistent growth.

Margin Outlook:

• NIM in the vehicle finance industry has been under pressure due to competition and a higher proportion of new vehicles.
• NIM is expected to stabilize in the coming quarters, with projections of 7.7%-7.8% in FY24/FY25.

Cost Efficiency:

• Operating expenses (opex) are expected to remain elevated in FY24 due to technological transformation.
• The tech transformation is aimed at improving productivity, efficiency, and reducing cost ratios.

Asset Quality:

• MMFS expects asset quality to improve due to better customer selection, early warning signal monitoring, and data-enabled collections.
• Credit costs are projected to remain low at around 1.6%-1.7% in FY24/FY25.

Conclusion:

• MMFS has made progress in its transformation journey and is well-positioned for future growth.
• Reducing volatility in operating performance is crucial for further positive revaluation.

More details here.