Can M&M Finance sustain its 27% rally amid improving margins?

The company reported 13% year-on-year growth in assets under management (AUM) and a healthy expansion in net interest margin (NIM) for the quarter, aided by a reduction in cost of funds. The momentum is likely to continue in the coming quarters. Analysts expect the company's return on assets (RoA) to improve over the medium term, following three consecutive years of decline. RoA fell to 1.9% in FY25, from 1.7% in FY24 and from 2.3% in FY23. NIM improved to 7% in the September quarter from 6.5% a year ago, supported by higher fee-based income and dividend inflows from its wholly owned insurance subsidiary Mahindra Insurance Brokers. The company expects to maintain NIM at the current level in the medium term. A 30 bps decline in cost of funds also contributed to margin gains, with the company benefiting from a funding mix where around 41% of borrowings are floating-rate while lending remains largely fixed-rate. Analysts expect the company's return on assets (RoA) to improve over the medium term, following three consecutive years of decline. RoA fell to 1.9% in FY25, from 1.7% in FY24 and from 2.3% in FY23. PL Capital expects the company's RoA to trend higher over the medium term, driven by improving spreads and lower credit costs. "Company expects credit cost to improve to 1.3%-1.7% over the long term, resulting in RoA improving to 2.2%-2.5%. We expect RoA to improve to 2.1% by FY28E, led by the improvement in spread and credit cost," the broking firm said in a report. It has upgraded the stock's target price to ₹375 from ₹300. Motilal Oswal Financial Services expects net profit to increase by 19% annually between FY25 and FY28 and projects return on assets and return on equity to improve to 2.2% and 14%, respectively by FY28, reiterating its buy rating with a target price of ₹400. (What's moving Sensex and Nifty Track latest market news , stock tips , Budget 2025 , Share Market on Budget 2025 and expert advice , on ETMarkets . Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .) Subscribe to ET Prime and read the Economic Times ePaper Online.and Sensex Today . Top Trending Stocks: SBI Share Price , Axis Bank Share Price , HDFC Bank Share Price , Infosys Share Price , Wipro Share Price , NTPC Share Price (You can now subscribe to our ETMarkets WhatsApp channel ) (What's moving Sensex and Nifty Track latest market news , stock tips , Budget 2025 , Share Market on Budget 2025 and expert advice , on ETMarkets . Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .) Subscribe to ET Prime and read the Economic Times ePaper Online.and Sensex Today . Top Trending Stocks: SBI Share Price , Axis Bank Share Price , HDFC Bank Share Price , Infosys Share Price , Wipro Share...

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