Buy Mahindra Financial Services; target of Rs 400: Motilal Oswal

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Motilal Oswal's report on Mahindra Financial Services

4QFY17 net profit of INR 2.34b missed estimate by 16%, belying its strong operating performance. PPoP increased 7% YoY to INR 7.25b (23% beat). Miss on PAT is largely driven by provisions of INR 1.1b, which were written back (over and above RBI requirement, and managements expected loss given default) in 1QFY17 based on expectation of losses on NPA portfolio.

Outlook

We increase FY18/19 estimates by 18%/17% to factor in better margins and AUMs. The stock trades at 2.8/2.6x FY18E/19E P/B. We use SOTP to arrive at a TP of INR 400.

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