Motilal Oswal: M&M Financial Q1 Controlled Opex Leads To PPoP Beat; Credit Costs Elevated
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Motilal Oswal Report
Mahindra & Mahindra Financial Services Q1 FY21 reported profit after tax of Rs 1.6 billion (up 128% YoY; down 29% QoQ), a 3% miss. While pre-provision operating profit beat our estimates by 25%, higher-than-expected provisions at Rs 8.4 billion led to the modest PAT miss.
The board approved a 1:1 rights issue at Rs 50 per share, amounting to Rs 30.89 billion as of July 23, 2020 (record date). As per our calculations, while FY21 networth increases approximately 25%, book value per share declines ~35% to Rs 125.
Month-on-month improvement in disbursements and collections is encouraging; however, its sustenance is the key monitorable. Within its product mix, tractors, entry-level cars, and LCVs are likely to do well, while medium and heavy commercial vehicle and taxi aggregator are likely to witness slow recovery.
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