Motilal Oswal Institutional Equities has placed a "Buy" call on the stock of Mahindra and Mahindra Financial Services.
"On 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 M&HCV and Taxi Aggregator are likely to witness slow recovery," the brokerage firm has stated.
"On the asset quality front, the true picture would be known only after the moratorium. However, the fact that the company is buffering up with an Rs 31 billion capital raise is comforting.
We increase our FY21 EPS estimate by 34% (off a low base) given: a) a healthy performance on Net Interest Income and b) lower opex, offset by higher credit costs.
Our FY22 EPS estimate is largely unchanged. We also factor the rights issue in our estimates. At the current market price of Rs 230, the stock trades at 1.1x post-rights FY22E BVPS (average cost = INR(230+50)/2 = INR140).
We maintain Buy, with target price of of Rs 320. This works out to INR160/share post rights issue (upside of 15%), translating to 1.2x FY22E post rights book value per share," Motilal Oswal Institutional Equities has said in its report.