Strong March quarter earnings are reinforcing confidence in select housing finance and lending companies, with brokerages pointing to a combination of margin expansion, steady loan growth and controlled credit costs as key triggers for ‘Buy’ calls.
Reports released after Q4FY26 show that companies such as Mahindra & Mahindra Financial Services, Larsen & Toubro Finance and Shriram Finance deliver stable to improved profitability even as parts of the rural and microfinance segments remain under watch.
Analysts are backing companies that show consistency in execution, diversified portfolios and improving return ratios, with target prices implying upside of up to 20%.
Margin expansion and steady credit trends support ‘Buy’ calls
The March quarter shows improving operating performance across lending companies, with margins expanding and cost ratios improving.
Credit costs decline or remain within guided ranges, supported by better collections and underwriting. While growth in assets under management varies across players, brokerages say diversification into retail and higher yielding segments is supporting earnings.
Firms expect operating leverage and stable asset quality to sustain profitability over the medium term.
JM Financial on Mahindra and Mahindra Financial Services: ‘Buy’
JM Financial Ltd. upgrades Mahindra and Mahindra Financial Services to ‘Buy’ with a target price of Rs 350, implying an upside of 19% from the current market price of Rs 294.
The brokerage says the company delivers a profit after tax beat of 6% in Q4FY26, driven by cost efficiency and margin expansion.
Disbursement growth rises to 11% year on year, supported by traction in tractors, passenger vehicles and used vehicles, while assets under management grow 12% year on year.
Asset quality remains at cycle best levels with gross non performing assets at around 3.4%. The company builds a prudential overlay of about Rs 217 crore during the quarter, strengthening buffers while underlying stress remains contained.
“Operating performance remained strong with MMFS delivering PPOP growth of 42% year on year driven by improved cost efficiency and margin expansion,” JM Financial says.
The brokerage expects gradual recovery in growth and models a 13% compound annual growth rate in assets under management over FY26 to FY28. It adds that diversification into small and medium enterprises and mortgage lending is gaining traction and will support future growth.
“We like management’s consistent efforts to improve operating leverage and asset quality and lift fee income, which are expected to support earnings growth,” JM Financial says.
Nuvama on L&T Finance: ‘Buy’
Nuvama retains a ‘Buy’ rating on L&T Finance with a target price of Rs 350, indicating an upside of about 20% from the current price of Rs 292.
The brokerage says net interest margins improve to 8.78% in Q4FY26 from 8.58% in Q3FY26, driven by lower cost of funds and better yields.
Credit cost declines to 2.64% from 2.83% sequentially, reflecting improving asset quality. Loan growth remains strong with the book expanding 25% year on year, while disbursements record sharp growth across segments.
“Strong loan and disbursement growth; beat on NIM,” Nuvama adds.
The brokerage expects growth momentum to continue, supported by retail expansion and improving return ratios. It notes that higher yielding segments such as personal loans and gold loans are likely to support margins going ahead.
“We reckon growth outlook shall be strong, an improvement in RoA and healthy credit efficiency,” Nuvama says.
Axis on Shriram Finance: ‘Buy’
Axis maintains a ‘Buy’ rating on Shriram Finance with a target price of Rs 1,200, implying an upside of 19% from the current price of Rs 1,011.
The brokerage says the company reports a strong March quarter with profit after tax rising to Rs 3,014 crore in Q4FY26 from Rs 2,139 crore in Q4FY25, supported by lower tax rate and steady operating performance.
Net interest income grows 21.3% year on year to Rs 6,751 crore, while margins remain stable at 8.61%. Cost discipline improves with the cost to income ratio easing to 26.0% from 30.5% year on year, supporting profitability.
“Steady margins and cost discipline to support earnings trajectory,” Axis says.
The brokerage notes that asset quality remains broadly stable, with gross non performing assets at 4.58% versus 4.54% in the previous quarter, while credit costs remain contained despite marginal pressure in some segments.
It expects growth to remain healthy with assets under management seen rising 17% compound annually over FY26 to FY28, supported by demand in vehicle financing and gold loans.
“The company remains on a strong footing with stable asset quality, healthy growth visibility and improving cost efficiencies,” Axis says.
Conclusion
Brokerage recommendations after Q4FY26 point to selective opportunities in housing finance and lending stocks, with Mahindra and Mahindra Financial Services, L&T Finance and Shriram Finance emerging as ‘Buy’-rated ideas. Analysts back these companies on improving margins, steady loan growth and controlled asset quality.
Disclaimer: The analysis and brokerage ratings provided represent the views of external research firms and do not constitute an offer or solicitation to buy or sell securities. Given the specific target prices and ‘Buy’ recommendations mentioned, readers are advised to consult with a SEBI-registered investment advisor before making any financial decisions. Market investments are subject to risk, and past performance of these lending institutions is not a guarantee of future returns.
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