HSBC Global Research
M&M Financial Services (Buy)
CMP: ₹412.25
Target: ₹496
In our view, M&M Financial Services appears relatively well positioned to navigate this demand slowdown phase. While some slowdown in growth is inevitable, we expect MMFS’s AUM growth to be better than its average of c15 per cent for FY14-18. We believe our expectations are conservative, with our PAT estimates lower than consensus by 6 per cent for FY20e and 8 per cent for FY21e. Current valuation at 2.2x FY20e PB is close to its long-term mean, appearing to factor in most concerns.
We reiterate M&M Financial Services as one of our preferred stocks among India’s asset financiers.
Downside risks: 1) A cutback in government spending could affect rural cash flows and impact demand; 2) A reversal of the tractor cycle in FY20 could impact growth (tractor contributes 17 per cent to total AUMs); and 3) A weaker-than-expected monsoon can impact growth as well as asset quality.