M&M Financial shares surge 7%, hit fresh 52-week high; analysts see further upside

Shares of Mahindra & Mahindra Financial Services (M&M Financial) jumped over 7 per cent in Tuesday's trade to hit a fresh 52-week high after the NBFC reported a strong set of quarterly results. Analysts largely sees the stock in the Rs 283-320 range over the next 12 months. Their price targets suggests a potential 15 per cent upside over Tuesday's high of Rs 277.95 level.

Motilal Oswal Securities said the March quarter numbers for M&M Financial were healthy and that conviction on the turnaround getting stronger, as this brokerage sees the stock at Rs 320. Given its long lineage, strong parentage, and a great liability franchise, M&M Financial has navigated the stress emanating from the pandemic reasonably well, and is well positioned to deliver on its articulated targets, Motilal Oswal Securities said. The synergies between the parent and M&M Financial have also played a very crucial role in scripting this potential turnaround, it said.

"Given the volatility in performance that the company has demonstrated in the past, we have ourselves closely watched its transformation over the last six quarters with some scepticism. While Anish Shah (Chairman, MMFS) himself acknowledged that the transformation envisaged in M&M Financial is only half-way complete, we are ready to believe in this transformation journey of M&M Financial," Motilal Oswal said.

JM Financial said M&M Financial's profit beat its estimates on lower provision but pre-provision operating profit was lower than its expectations on account higher opex and staff costs. The NBFC management indicated strong focus reducing the volatility in asset quality/profitability while being committed towards delivering a on its Mission 2025 – doubling the AUM (over FY22 levels), turn on asset (RoA) of 2.5 per cent.

"This is likely to be led by driving a higher share of premium customers (which also mirrors the parent’s newer product profile), increase in share of newer products low credit costs. M&M Financial stock price has been rewarded with the management's reinvigorated focus on key profitability and asset quality parameters and incremental returns will be driven predictability of earnings and continued delivery of its stated objectives," it said.

This brokerage has a target of Rs 310 on the stock.

M&M Financial's re-rating prospects are contingent on stable and predictable earnings traction and execution, said Elara Securities. Monsoon outlook and ceding market share due to competition are key risks, it said. This brokerage has upped its target on the stock to Rs 283 from Rs 230.

In light of the strengthened risk management, better collections infrastructure, improved technology and a wider product suite, Nuvama Institutional Equities said it is confident that the volatility in quarterly earnings and asset quality are history. This brokerage sees the stock at Rs 310.