Reviews
In this edition, we have reviewed M&M Financial Services and Larsen & Toubro Infotech. We suggest our reader-investors to HOLD in M&M Financial Services and Larsen & Toubro Infotech
We had previously recommended Mahindra and Mahindra Financial Services in Volume 33, Issue No. 12, dated May 14 - 27, 2018 under the ‘Special Report’ segment. The stock was then trading at Rs 504 and was recommended based on the strong valuations, improved asset quality and growth in core business. M&M Financial Services is a Non- Banking Finance Company (NBFC) and provides financial services in rural and semi-urban areas across India.
The company offers a range of retail products and services, including financing vehicles for commercial and personal use, tractors, small and medium enterprise loans and several other financial products. On the consolidated financial front, the company posted net sales of Rs 2,913.97 crore for Q2FY20, up by 16.19 per cent from Rs 2,507.89 crore in Q2FY19. The PBT was Rs 495.45 crore in Q2FY20, depicting a fall of 21.74 per cent from Q2FY19 when it was reported at Rs 633.10 crore. The net profit also reduced by 40.24 per cent from Rs 421.91 crore in Q2FY19 to Rs 252.12 crore in Q2FY20.
On the annual front, the net sales came in at Rs 10,371.70 crore for FY19, an increase of 31.56 per cent from the previous fiscal year when it was reported at Rs 7,883.85 crore.
The PBT in FY19 increased by 49.08 per cent to Rs 2,793.83 crore as against Rs 1,112.4 crore posted in FY18. Rs 1,874.11 crore posted in FY18. Similarly, the net profit gained in FY19 was Rs 1,820.35 crore, an increase of 53.54 per cent from Rs 1,185.60 crore gained in FY18.
Improvement in asset quality and collections post good monsoon pose as a growth driver for the company. Revival of the auto sector will positively impact the company’s growth. Hence, we recommend a HOLD.
We had previously recommended Larsen & Toubro Infotech in Volume 34, Issue No. 12, dated May 13 – 26, 2019 under the ‘Choice Scrip’ segment. The stock was then trading at Rs 1695 and was recommended based on the company’s growth in orders and premium pricing over competitors.
The company offers end-to-end software solutions and services such as package implementation and support, application development and maintenance, enterprise application integration, data warehousing and business intelligence, etc.
On the consolidated financial front, the company posted net sales of Rs 2,570.7 crore in Q2FY20, up by 10.27 per cent from Rs 2,331.2 crore in Q2FY19. The PBT was Rs 473.4 crore, depicting a fall of 11.78 per cent in Q2FY20 from Rs 536.6 crore posted in Q2FY19. The PAT was Rs 360.4 crore in Q2FY20, down by 9.97 per cent from Rs 400.3 crore in the same period of the previous fiscal year.
On the annual front, the net sales came in at Rs 9,445.8 crore in FY19 as against Rs 7,306.5 crore in FY18, a growth of 29.28 per cent. The PBT in FY19 increased by 40.67 per cent to Rs 2,027.8 crore as against Rs 1,441.5 crore posted in FY18. The PAT in FY19 was Rs 1,515.5 crore, up by 36.24 per cent from Rs 1,112.4 crore posted in FY18. With the continuous increase in deals, the company looks at a positive growth momentum. This coupled with its recent strategic acquisitions will help LTI in strengthening its digital and analytics offerings and drive revenue.
We thus recommend a HOLD.