Motilal Oswal retains buy rating on Manappuram Finance, sees 26% upside

Motilal Oswal estimates the company’s gold AUM to grow by around 3.5 percent QoQ in Q4 FY23, driven by improving demand from small-ticket size borrowers.

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Manappuram Finance stock price gained over 2 percent intraday on March 22 after Motilal Oswal retained its buy rating on the stock.

The broking firm has a target of Rs 150 per share, an upside of 26 percent from current market price.

According to the research firm, Manappuram Finance which trades at 0.9x FY24E P/BV can deliver gold loan growth of around 7 percent in FY24 and 8 percent in FY25. It estimates consolidated AUM growth of around 19 percent and consolidated RoA of around 4 percent and RoE of around 18 percent in FY24.

However, Motilal Oswal sees significant market share loss in the gold lending business while non-gold products provide product mix diversification and reduce the deep cyclicality inherent in gold lending. It should be done with caution since Manappuram Finance has not demonstrated any clear ‘right to win’ in non-gold products in the past.

“Manappuram Finance expects commercial vehicle (CV) AUM to grow to around Rs 2300 crore by March 2023 and expects this segment to grow by 70-80 percent in FY24. CV GNPA is around 3 percent and it is in line with the industry even as the asset quality is improving. RoA is 1.5 percent and is expected to grow to 2.5 percent by FY24 and 3.5 percent by FY25, driven by improvements in operating efficiency and growth in the size of the
loan book,” the report said.

“The asset quality is improving in affordable housing as well since it is now able to liquidate repossessed properties. The company expects the GNPA level in affordable housing to decline to 2 percent from around 5 percent currently,” the report added.

Motilal Oswal estimates the company’s gold AUM to grow by around 3.5 percent QoQ in Q4 FY23, driven by improving demand from small-ticket size borrowers.

At 11:53 hrs Manappuram Finance was quoting at Rs 118.95, up Rs 2.35, or 2.02 percent on BSE. It has touched an intraday high of Rs 119.40 and an intraday low of Rs 116.75.

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