Mahindra & Mahindra Financial Services Ltd's Q1FY19 standalone net profit rises 33.6% yoy to Rs269.05cr : Beats Estimates

The company’s standalone NII stood at Rs1cr, down 99.87% yoy and 99.92% qoq.

Aug 14, 2018 07:08 IST India Infoline Research Team

Mahindra & Mahindra Financial Services Ltd Q1FY19

Standalone Results Q1FY19: (Rs. in cr)

Q1FY19 YoY (%)
NII 1,077 45.0
Net Profit (adjusted) 269.05 33.6

Mahindra & Mahindra Financial Services' (MMFS) Q1FY19 revenue has improved by 20.6% yoy to Rs1,939cr against Rs1,608.7cr. The NII for the quarter has improved by 45% yoy to Rs1,077cr. MMFS' net profit for the quarter was 13% ahead of our estimates at Rs269cr, against Rs201.4cr yoy. The beat on net profit was due to higher revenue growth.

  • MMFS' AUM growth for the quarter was 21% yoy to Rs58,711cr. Growth was driven by tractors, CV and SME segments.
  • During Q1FY19, the share of Auto/UV declined from 30% to 27% yoy, which was offset by SME financing (8% to 12% yoy).
  • Its disbursement growth was 35% yoy to Rs10,338cr for the quarter.
  • The company opened 7 new branches in the quarter, taking the total branch count to 1,291 branches.
  • Calculated NIM on AUM increased 130bp YoY to 7.7% driven largely equally by higher yield on loans (better asset quality performance), lower cost of funds and lower leverage.
  • Like peers MMFS has also increased the share of bank borrowings & CPs and has decreased the share of NCDs over the past year.
  • The borrowing mix is as follows- Banks: 30%, NCD: 44%, PD: 8%, CP: 16% and securitization: 1%.
  • C/I ratio for the quarter stood at 35.3%.
  • Total Provisions as a %age of loans stood at 5.3% vs 5.1% a quarter ago and 6.7% a year ago.
  • PCR including standard assets provisions largely stable qoq at ~59%.
Key conference call highlights
  • The company has gained market share from banks.
  • OEM discounts are still continuing in order to reduce inventory. Management expects it to abate by the festival season.
  • Mahindra HFC is present in 70,000 villages, while MMFS is present in 3 lakh villages. The HFC will expand into all these villages.
  • Cost of Funds should increase by 15bps in FY19E.
  • Growth also came in from 100 new branches opened in the past 12 months.
  • For Mahindra Rural Housing Finance, there is NPL hike in certain geographies like Maharashtra (45-50% of total loan book). Management expects it to improve in upcoming quarter.
  • MH, TN, AP, MP and Gujarat are the key states for Mahindra Rural HFC.
  • ECL - Stage 1 - 1.2%; Stage 2 – 12-14% Stage 3 – 35%.
  • GNPL ratio under IGAAP is 70bp higher in 1QFY19 vs 4QFY18
  • Will try to get GNPL ratio (IGAAP) to 7% by end-FY19 vs. 8.5% in end-FY18.
  • Expect credit costs for FY19 to be lower than that of 1QFY19 (2.0%).
  • 80% of UV disbursements is of M&M vehicles.
  • D/E ratio to be 5.5-6x going ahead.

Technical View:

Mahindra & Mahindra Financial Services Ltd ended at Rs. 517.20, up by 4.65 points or 0.91% from its previous closing of Rs. 512.55 on the BSE.
The scrip opened at Rs. 517 and touched a high and low of Rs. 527.45 and Rs. 504.65 respectively. A total of 50,73,140 (NSE+BSE) shares were traded on the counter. The stock traded below its 100 DMA.

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