We maintain buy on Mahindra & Mahindra Financial Services (M&M Financial) with a target price of R1,140. We largely maintain our overall earnings estimates, as volume-cuts in UV/LCV segment are compensated by higher volume expectations from the high margin tractor business. We value M&M at 11xFY15E core EPS (M&M-MVML) at R777 per share and investments at R363 per share, which get reflected in our target price.
We expect continued strength in the tractors business to offset softness in the automotive business and hence largely maintain our earnings estimates. Revenues were up 9.3% y-o-y, while ebitda was up 13.4% y-o-y and adjusted PAT was up 16.9% y-o-y. Revenues were below estimates by 4.2%, while ebitda was in line on higher than expected ebitda margins at 14.4% (our estimate: 13.8%). Lower depreciation and higher other income on account of dividends from subsidiaries led to PAT being ahead of estimates by 5.4%. Tracking the strong tractor volumes, the high margin tractor segment (FES) contributed ~50% of the quarterís Ebit.
The company increased its guidance for tractor volumes from over 6-8% to double digit volumes, while stating that higher growth rates of 15-17% were a possibility.