M&M Financial stock tumbles over 5% on BofA securities downgrade

economictimes.indiatimes.com:

BofA Securities downgraded the stock by one notch to 'neutral' and saw limited upside in its near-term stock price. The US brokerage cited the stock's premium valuations and said expectations of high NIMs and opex could disappoint in the near-term. The stock trades at 2.2 times its forward price-to-book value — above its long-term average.Shares of M&M Financial were among the top five losers in the NSE 500 universe.

The stock fell to a low of ₹321.90 apiece on the NSE before closing Friday's session at ₹329.50 apiece, down 3.36% from the previous close. Over one crore shares exchanged hands on the BSE and NSE, twice the combined average daily volume for the last one month. BofA Securities expects the non-bank lender to see a sequential loan growth of 4.6% in the first quarter of FY24 and NIMs to contract 16 basis points (bps).

100 basis points equals 1%. «Near-term disappointment likely on higher-than-expected net interest margin contraction, higher cost of funds and operating expenses on tech,» it said in a client note. BofA Securities has set a price target of ₹375 per share, translating into 14% upside from the current levels.

This is after the stock's stellar run since the start of calendar 2023, where it has yielded nearly 37% returns. The stock is up a whopping 93% from its 52-week low of ₹176.10 in September last year. The brokerage also told investors that it remained bullish on the company's long-term prospects despite near-term challenges.