M&M Financial shares fall up to 10% to hit 52-week low despite 55% YoY profit in Q2; brokerages cut target price

The stock closed at 3.41 percent lower at Rs 287.30. Mahindra & Mahindra Financial reported a 55 percent year-on-year rise in its standalone profit after tax (PAT) to Rs 882 crore in the July-September quarter of FY27, aided by consistent business outcomes and lower credit costs. The company’s net profit came in at Rs 569 crore in the same quarter the previous financial year. Revenue from operations grew 15 percent YoY to Rs 5,164 crore from Rs 4,472.67 posted in the year-ago period.

The total income stood at Rs 5,175 crore, increasing 15 percent YoY from Rs 4,489 crore in Q2FY26. The net interest margins (NIM) rose 17% YoY to stand at Rs 2,834 crore in Q2FY27 against Rs 2,423 crore posted in the same quarter the previous fiscal. The NIM margin remained flat at 7 percent. On a consolidated basis, net profit rose 61 percent to Rs 911 crore and consolidated total assets grew 21 percent to Rs 1.80 lakh crore.

Total Income increased by 18 percent at Rs 5,962 crore for Q2FY27, as against Rs 5,049 crore for Q2FY26. During the second quarter, credit cost moderated to 1.6 percent of average total assets from 2.2 percent in the year-ago period, the company said in a regulatory filing. Raul Rebello, MD & CEO, Mahindra Finance said, "Our Q2 performance gives us further confidence that the changes we have been making are translating into stronger and more consistent business outcomes.

With disbursements up 22% on broad-based growth, credit costs contained at 1.6%, and profit growth of 55%, we are encouraged by the momentum and remain focused on disciplined execution towards our FY31 ambitions” Mahindra & Mahindra Financial share price: What brokerages say Despite the strong financial performance in Q2FY27, several brokerages have cut their target prices on M&M Financial Services, citing potential pressure on margins, rising funding costs, insurance commission reforms and risks to rural cash flows.

The brokerages are also cautious on the NBFC’s earnings growth in the upcoming quarter due to concerns over possibility of further interest rate hikes, an El Niño-related impact on rural incomes and changes in insurance commission norms. Some brokerages continued to highlight the company's improving operating performance and asset quality. CLSA on M&M Financial CLSA maintained an 'Outperform' rating with a target price of Rs 405 on M&M Financial.

The brokerage said the company delivered another strong quarter with pre-provision operating profit (PPOP) and profit after tax beat estimates by 5 percent and 12 percent, respectively, driven by higher fee income and lower credit costs. PPOP grew 20 percent YoY, while calculated net slippages declined by around 15 basis points YoY and the stage 2+3 loans ratio declined to a multi-year low. The brokerage also noted that disbursement growth has accelerated over the past two quarters and could translate stronger assets under management (AUM) in the coming quarters.

However, it cautioned that the company's largely fixed-rate loan book and the fact that around 50 percent of its borrowings are floating-rate could put pressure on spreads in a rate-hike cycle. CITI on M&M Financial Citi retained its 'Buy' rating for M&M Financial with a target price of Rs 420. The brokerage firm noted that despite NIM compression by 30 bps, the contained credit costs, fee income and modest operating expense moderation helped the company sustain a return on assets of 2.2 percent, with PAT up 55 percent YoY (down 2 percent QoQ), surpassing Citi’s estimates.

Citi also highlighted improvements in asset quality and broad-based disbursement growth across passenger vehicles (28 percent), pre-owned vehicles (15 percent), commercial vehicles (16 percent), construction equipment and tractors (13 percent), driving AUM growth by 15 percent. The brokerage said the company's credit costs remained resilient during the first half of FY27 despite rural-sector headwinds, supporting management's confidence in its existing guidance.

It further said the company navigated 1H volatility well augmenting underwriting scorecards, portfolio monitoring, and collections. It noted that loan spreads narrowed by 30 bps as growth tilted toward trade advances (incremental 3 percent QoQ delta) & lifted liquidity to 10 percent of balance sheet size. Nomura on M&M Financial Brokerage Nomura trimmed its target price to Rs 400 from Rs 415 and cut its net profit estimates for FY27-FY29 by 1-9 percent.

The brokerage expects the company's cost of funds to rise by around 70 basis points over the next five quarters, although it continues to see asset quality holding up well. HSBC on M&M Financial HSBC retained its 'Buy' rating but cut its target price to Rs 340, citing a healthy operating performance driven by higher fee income and lower credit costs. The brokerage tweaked its FY27-FY29 earnings-per-share estimates to reflect higher assets under management (AUM) growth expectations, while accounting for increasing pressure on margins and fee income.

Its revised target price implies a valuation of 1.5 times estimated FY28 book value per share, compared with 1.7 times earlier. Nuvama on M&M Financial Nuvama Institutional Equities reduced its target price by nearly 7 percent to Rs 340 from Rs 365 and retained its 'Hold' rating. The brokerage also cut its earnings estimates for FY28 and FY29 by 6-7 percent, citing the potential impact of higher interest rates on margins and lower insurance commissions on earnings.

It expects the rate hike by the Indian central bank will likely reduce the profit margin of the company. A decline in insurance commission is also likely to drag down the company's estimated earnings for FY28 net interest income, the brokerage said. Nuvama also flagged the risk of an El Niño-related drought affecting 282 districts across three states, potentially delaying improvements in credit costs and weighing on tractor financing and the company's rural cash flow.

Emkay Global Financial Services on M&M Financial Accounting for the company's September quarter performance and recent slowdown in growth due to higher cost of funds and insurance commissions norms, Emkay Global Financial Services has cut the company's earnings estimates for FY27–FY29 by 1–2 percent. The brokerage maintained its ‘Buy’ rating, but reduced the target price by nearly 10 percent to Rs 370 from Rs 410.

The brokerage stated the company's performance for the last two quarters is likely to be weak. IDBI Capital Equity Research on M&M Financial IDBI Capital Equity Research has maintained its ‘Buy’ rating on the stock with a target price of Rs 342.