Mahindra Finance shares surge 19% as brokerages hike targets
Mahindra and Mahindra Financial Services stock soared 19% over two sessions after a 75% profit surge and record first-quarter disbursements prompted analysts to raise their price targets.
Mahindra and Mahindra Financial Services shares surged 19% across two consecutive sessions, hitting an intraday high of ₹384 on Wednesday. The rally followed the release of a strong first-quarter earnings report that showed a 75% jump in consolidated net profit to ₹927 crore.
The Indian non-banking financial company's standalone profit grew 70% year-on-year to ₹899 crore. This bottom-line expansion was driven by a 55 basis point year-on-year increase in net interest margins to 7.3%, alongside a 44 basis point improvement in credit costs, which fell to 1.5%.
Disbursements grew 22% year-on-year, marking the highest first-quarter figure in the company's history. Assets under management rose 13% year-on-year, indicating that the accelerated loan origination is beginning to translate into broader balance sheet expansion.
Analyst Upgrades
Analysts responded by upgrading their outlooks. Emkay Global Financial Services lifted its rating to "buy" from "add" and raised its target price by 18.4% to ₹450. "We upgrade Mahindra Finance to a 'buy' while revising up Jun-27E target price by 18.4% to ₹450 from ₹380, implying SA FY28E PBV of 1.9 times and nearly 10% of value from subsidiaries," Emkay said.
The brokerage highlighted the lender's fortified balance sheet and structural improvements in profitability. "With the multi-year transformation now clearly showing growth and ROA moving toward 2.5%, we believe the structurally improved profitability and fortified balance sheet present a compelling risk-reward ratio, supporting our upgrade," Emkay added.
Emkay pointed to specific risk metrics that support its positive stance. "With GS2+GS3 at a multiyear low (8.3%), PCR at 58.1%, and a healthy capital position, the balance sheet is well placed to absorb any stress from the external environment," the firm noted.
JM Financial maintained its buy recommendation and increased its target price to ₹410 from ₹350, keeping the stock as its top pick in the vehicle finance sector. The firm cited Mahindra Finance's lower exposure to high-risk segments and a more attractive risk-reward profile relative to peers.
"The sharp acceleration in disbursement growth also reinforces confidence in a pickup in AUM growth ahead, with stable-to-improving asset quality providing an additional positive. We raise our FY27–28 EPS estimates by 7–9% and forecast an AUM CAGR of nearly 14% for FY27–28 with average RoA and RoE of nearly 2.4% and 14.5% in FY27E and FY28E, respectively," JM Financial stated.
