Shares of Manappuram Finance have been in base building mode since last six months but after the results for the third quarter of the current financial year, Prabhudas Lilladhar is highly bullish on the financial stock. However, the slowdown in gold loans in the third quarter of FY 2022-23 took away the sheen from the financial company. Brokerage believes that Manappuram Finance share price may soon come out of base building mode and may move higher 144 level in the long term, providing its shareholders with a return of about 25 percent from the current market price. 115 per share.
Bullish on Manappuram Finance shares, the brokerage said, ‘We raise our FY25 NII estimates by 3%, with cost of funds cut to 8.7% from 8.9%. Our FY23 and FY24 estimates remain unchanged. Manappuram Finance (MGFL) reports 3% QoQ decline gold loan AUM, while yield increased by 50bps to 22.4% as compared to 21.9% in Q2FY23. Gold financiers find it difficult to achieve gold AUM growth amidst intense competition and pricing pressure. We believe the company is on the right track to ensure that margins are protected. In contrast microfinance, commercial vehicles, home loan, MSME/Personal loans are performing strongly, offsetting the slowdown in gold loan business. Maintain ‘Buy’ rating on the stock. Re-rating may happen once gold loan AUM shows growth again.”
Highlighting the company’s asset quality, the Prabhudas Lilladher report said, “GNPAs reduced to 1.6% for standalone business (gold) from 2.0% in Q2 FY2020. MFI business contributed to GNPAs.” 6.7% vs. Q2’23 saw a sharp improvement to 8.8%. And credit cost declined by 34% QoQ. For housing, GNPAs were broadly stable at 5.4% vs. 5.5% (Q2FY23) and vehicle finance GNPAs Decreased to 3.1% versus 3.6% in the previous quarter. Asset quality should improve further, going forward, and management has improved to drive further reduction in debt costs. microfinance Business.”
Growth in Non-Gold AUM (+15.6%QoQ/33.3%YoY) at `319 billion, registering a growth of 4.9% YoY and 4.0% QoQ while Sleep Loan AUM declined by 9% YoY and 3% QoQ. Gold holdings declined 4.5% QoQ (down 14.5% YoY) to 60 tonnes. Teaser rates were reevaluated and competition from banks increased. Other segments performed very well, with MFI AUM growing 13.3% on QoQ basis, VF AUM growing 12.0% and HL growing 9.0% QoQ and other loans including MSME continued strong momentum with 34.7% QoQ growth. PAT declined by 3.9% QoQ due to lower NII and lower other income,” the brokerage said.
The brokerage further said that the company is holding excess liquidity of Rs. 23bn to meet the redemption of 3y senior secured fixed rate notes due in Jan-20; Negative carrying cost also impacted profitability. Opex grew 4.4% on a QoQ basis and remains elevated. NIM remained stable at 14.0% versus 14.1 in Q2FY23 and 12.4% in Q3FY22.
Regarding suggestion to investors Manappuram Finance shares, reports Prabhudas Lilladher, “We maintain our ‘Buy’ rating on TP 144 (up) at 1.1x Sept’24e p/abv.”
Disclaimer: The views and recommendations given above are those of individual analysts or broking companies and not of Mint. We advise investors to do due diligence with certified experts before making any investment decision.
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