"Post the recent correction, the stock trades at 1.2 times Sep-28E ABV. Factoring in margin/fee pressures, we are cutting FY28E–29E earnings by 6–7 per cent as also target price to Rs 340 per share from Rs 365 based on 1.4x Sep-28E ABV and subsidiary/investment at INR16/share; retain ‘HOLD’.
MOFSL called MMFSL Q2 results steady, supported by healthy disbursement and AUM growth. Asset quality improved in H1, it said, with credit costs remaining contained despite weak monsoons, El Niño concerns and elevated crude prices.
MOFSL said NIM declined due to higher liquidity buffers and seasonal trade advances, with the management expecting an improvement in NIM in the next quarter.
"MMFSL currently trades at 1.4 times FY28 P/BV. With a projected AUM/PAT CAGR of 14 per cent/18 per cent over FY26-28 and RoA/RoE of 2.2 per cent/13.5 per cent in FY28, we reiterate our Buy rating with a target of Rs 375," MOFSL said.
Investec suggested 'Buy' with a target of Rs 425. UBS has a 'Neutral' stance on the stock with a target of Rs 330. CLSA suggested 'Accumulate' with a target of Rs 405. Jefferies, Morgan Stanley and JPMorgan suggested targets in the Rs 330-347 range. For Citi, MMFSL is worth Rs 420, while HSBC gave a target of rs 340 on the stock.
The MMFSL management reiterated its medium-term guidance of 16-18 epr cent AUM growth, 1.3-1.7 per cent credit cost and 2.2-2.5 per cent RoA, but cautioned that the current 55-70 per cent PAT growth is unsustainable as credit costs are largely optimized, and guided to an upward trajectory in cost of funds amid rate hikes.
"Rising CoFs, the proposed insurance commission cuts (fees at 1.6 per cent of assets) and drought-led tractor stress remain key monitorables, in our view. We raise AUM growth by 1 per cent but bake in NIM decline, leaving FY27E earnings largely unchanged, while further NIM cuts lead to a 3 per cent downward revision in FY28E/FY29E earnings," it said.
This brokerage suggested an unchanged target price of Rs 400 on MMFSL.
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