Shares of M&M Financial Services zoomed nearly 10% in the early trade on Thursday after the net profit came in line with market estimates. During the trade, the stock opened with a gap up of Rs. 12.4 at Rs. 206 and surged further to hit an intra-day high of Rs. 214.40. At noon, the stock was trading at around Rs. 213.05, up by 10.05% on the BSE. During Thursday's intraday, the stock recorded a volume of 20 million shares, both in the NSE and BSE, a 6.84 times surge over its average weekly volume of 2.9 million.
Taking the intraday price into account, the stock was trading 65.66% above its 52-week low of Rs. 128.
On Wednesday, the company reported a 55.39% drop in its consolidated net profit to ₹492 crore in Q2FY23 as against ₹1,103.8 crore in the same quarter of the previous fiscal. However, sequentially, the net profit was up 104.93%. Revenue from operations increased by 2.64% to Rs. 3,029 crore during the quarter, compared to Rs. 2,950 crore in the corresponding quarter of the previous fiscal. Further, the EBITDA margin dropped to 64.44% year on year from 89.15%, down by almost 2,471 basis points (bps).
In an exchange filing with the BSE, M&M Financial Services stated that the second quarter of the previous year witnessed a significant reversal of impairment provisions as a result of improvements in asset quality, which had deteriorated during Q1 FY22 due to the second wave of Covid-19. This resulted in a higher profit after tax for Q2 FY22.
In Q2FY23, net interest income stood at Rs. 1,540 crore, up 2% YoY. Net interest margin (NIM) came in healthy at 7.5%. In Q2 FY23, the company's loan book increased by 9% to Rs. 73,817 crore compared to Q1 FY23, aided by an increase in disbursements. Disbursement for the quarter stands at Rs. 11,824 crore was up 83% on a YoY basis, Mint reported.
In mid-October, the company announced a strategic partnership with India Post Payments Bank to enhance credit access to a larger customer base. As a part of this alliance, India Post Payments Bank will provide lead referral services to Mahindra Finance for passenger vehicles, three-wheelers, tractors, and commercial vehicle loan categories and provide cash EMI deposit facility to existing Mahindra Finance customers at post offices.
Meanwhile, in September, the stock plunged after the Reserve Bank of India (RBI) ordered the company to stop using third-party loan recovery services. After the RBI announcement came in on September 22, the stock crashed 20% in just seven trading sessions. The company responded that the halt on vehicle recovery by third-party agencies would not "have any material impact" on its financials.
YTD, the stock has risen from around Rs. 148.95 to the current trading price of Rs. 213.05, representing a 42.49% increase. At the prevailing price, the stock traded at a price-to-earnings (P/E) multiple of 11.20, while the price-to-book value ratio stood at 1.40.
The promoters owned 52.2% of the shares, while FIIs and domestic institutional investors each owned 16.9% and 22.1%, respectively. Regular shareholders own 8.6 per cent.
An average of 29 analysts polled by MintGenie have a 'buy' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.
