Home / Markets / Stock Markets /  Manappuram Finance shares to give big upside after Q3 results, says brokerage

Manappuram Finance shares have been in base building mode for last six months but after the Q3 results for the current fiscal, Prabhudas Lilladher is highly bullish on the financial stock. Though, slowdown in gold loan took off shine from the financial company in third quarter of the financial year 2022-23. Brokerage believes that Manappuram Finance share price may soon come out of the base building mode and it may go up to 144 apiece levels in long term, delivering around 25 per cent return to its shareholders from current market price of around 115 per share.

On reason for being bullish on Manappuram Finance shares, the brokerage said, 'We increase our FY25 NII estimates by 3% given decrease in cost of funds from 8.9% to 8.7%. Our FY23 and FY24 estimates remain unchanged. Manappuram Finance (MGFL) reported 3% QoQ decline in gold loan AUM, whereas yields were up by 50bps to 22.4% as against 21.9% in Q2FY23. The going seems to be tough for gold financiers to achieve gold AUM growth, amid intense competition and pricing pressure. We believe company is on the right track in ensuring margins are protected. Conversely microfinance, commercial vehicles, home loan, msme/personal loans are performing strongly thereby compensating for the slowdown in the gold loan business. Maintain ‘BUY’ rating on the stock. Re-rating can happen once gold loan AUM starts seeing growth again."

Highlighting upon the asset quality of the company, Prabhudas Lilladher report said, "GNPA reduced to 1.6% for standalone business (gold) from 2.0% in Q2FY23. MFI business saw sharp improvement in GNPA to 6.7% vs 8.8% in Q2’23, and credit cost declined 34% QoQ. For housing, GNPAs were largely stable at 5.4% vs 5.5% (Q2FY23) and vehicle finance GNPAs reduced to 3.1% vs 3.6% last quarter. Asset quality should improve further, going forward, and management has guided for further reduction in credit cost in microfinance business."

'AUMs at Rs319bn reported growth of 4.9%YoY and 4.0%QoQ, led by growth in non-gold AUM (+15.6%QoQ/33.3%YoY) whereas gold loan AUM declined 9%YoY and 3%QoQ. Gold holdings declined by 4.5% QoQ (down 14.5% YoY) to 60 tonne. Teaser rates were repriced and competition intensity from banks remained elevated. Other segments performed very well, MFI AUMs grew 13.3% on a QoQ basis, VF AUMs grew 12.0% and HLs grew by 9.0%QoQ and other loans including MSME continued strong momentum with 34.7% QoQ growth. PAT declined 3.9% QoQ, due to lower NII and lower other income," brokerage added.

The brokerage went on to add that company is is holding excess liquidity of Rs. 20bn to meet redemption of 3y senior secured fixed rate notes, due in Jan-23; negative carrying cost of which also had an impact on profitability. Opex rose by 4.4% on QoQ basis and remains elevated. NIMs remained stable at 14.0% vs 14.1 in Q2FY23 and 12.4% in Q3FY22.

On suggestion to investors in regard to Manappuram Finance shares, Prabhudas Lilladher report said, "We maintain our ‘BUY’ rating at TP of 144 (unchanged) on 1.1x Sep’24E P/ABV."

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.

Know your inner investor Do you have the nerves of steel or do you get insomniac over your investments? Let’s define your investment approach.
Take the test
Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Recommended For You

Get the best recommendations on Stocks, Mutual Funds and more based on your Risk profile!

Let’s get started
Get alerts on WhatsApp
Set Preferences My ReadsWatchlistFeedbackRedeem a Gift CardLogout