Manappuram Finance shoots 10% as strong Q2 show triggers bullish brokerage views

Shares of Manappuram Finance jumped 10 percent in early trade on November 15 as the NBFC posted a year-on-year growth of over 36 percent in its consolidated net profit to Rs 560.65 crore for the quarter ended September, leading brokerages to maintain their bullish stance.

As of 9.26 am, shares of the gold financing company were trading at Rs 150.7 on the NSE, higher by 7.37 percent from the previous session’s closing price.

The net interest income of Manappuram Finance rose 25.6 percent to Rs 1467.3 crore in the July-September quarter, from Rs 1377.9 crore in a year-ago period.

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The consolidated AUM increased 27 percent year-on-year to Rs 38,950 crore, while the gold AUM expanded 8 percent YoY. Motilal Oswal noted that the NIMs on gold loans expanded 15 bps quarter-on-quarter as a result of expansion in yields and sequentially stable borrowing costs.

To mitigate the cyclicality in the gold loan segment, the company has been actively diversifying into non-gold segments, with the share of non-gold products in the firm’s AUM mix at 47 percent compared to 37 percent in Q2FY23. “We believe Manappuram Finance should tread carefully in the non-gold segments as it is yet to exhibit any clear ‘right to win’ in these segments,” said Motilal Oswal.

Also Read | Manappuram Finance Q2 results: Net profit rises over 36% to Rs 560.65 crore

Global brokerage firm Morgan Stanley retained its overweight call on the gold financier as Manappuram Finance beat the PAT estimate by 10 percent on expanding gold loan yields. For the quarter, gold loan yields improved by 50 bps to 22.1 percent, compared to 21.6 percent in Q1FY24. However, the credit costs were disappointing.

Morgan Stanley raised its target price on the company to Rs 200 apiece from Rs 183 per share, which comes at a 38.1 percent upside from the closing price on November 13 of Rs 144.8 per share.

BofA Securities noted that the earnings posed as a surprise on strong fee income and lower opex. This fiscal year, the primary focus will be on profitability and portfolio diversification. The global brokerage added that it believes the P/B undervalues Manappuram Finance’s strong non-gold business growth and the improving MFI yield.

The management guided for gold loan growth of 8-10 percent YoY in FY24 and expects to maintain pricing discipline in gold loans despite high competition. Additionally, the management has stated that it will not pursue loan growth at the cost of a compression in spreads, will continue to be a driver for higher profitability, said MOFSL.

On November 13, shares of the NBFC settled 4.66 percent higher on the NSE at Rs 144.8 apiece. The company also declared an interim dividend of Rs 0.85 per equity share of face value Rs 2.

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