Shares of Mahindra and Mahinda Financial Services started the session on a negative note on Thursday and fell 7.5% in intraday trading after the company reported results for the December quarter.
The company reported consolidated net profit of Rs 992 crore for the fiscal third quarter, down 10% from Rs 1,103 crore in the September 2021 quarter. On a stand-alone basis, net profit was to Rs 894 crore in the quarter, compared to a loss of Rs 274 crore a year ago, according to the company’s statement.
Net interest income at Rs 1,580 crore was up 14% year-on-year, reflecting the widening spread, the company said.
Global brokerage CLSA has an outperformance call on the stock with a target price of Rs 240 per share. The brokerage sees a 50% rise in the stock, which was listed at Rs 158.75 on BSE at the time of writing.
CLSA reduced the FY22 earnings estimate by 42% due to a one-time event, FY23 by 2% and FY24 by 6%. There will be a one-time impact on credit costs in the fourth quarter on RBI standards for recognition of NPLs, he said.
On the December quarter numbers, the brokerage said, the third quarter was a continuation of the recovery cycle that began in the second quarter.
Meanwhile, Macquarie said M&M Financial was hit hardest among its peers by RBI’s new NPL standards. It maintained a “neutral” rating with a target price cut to Rs 175 per share.
According to Macquarie, Mahindra Finance shares have no short-term triggers, but the valuation is undemanding. Short-term provisions could remain high, he said. The brokerage cut its FY22 EPS (earnings per share) estimate by 77% to account for the large first-half loss.
As of 12:40 p.m., Mahindra Finance shares were trading down 6.01% at Rs 158.60 on BSE and down 6.01% on NSE also at Rs 158.85.