Manappuram Finance - Sustenance Of 18-20% RoE: Yes Securities

Yes Securities Report

In its Analyst/Investor Meet, Manappuram Finance Ltd. emphasised on-

1. growth possibility of 8- 10% per annum in gold loans with yields of 21-22%,

2. further ramping-up assets under management share of non gold loan products while improving their profitability,

3. likelihood of sustaining 18-20% consolidated portfolio growth and return on equity, and

4. promoters remaining fully committed in running operations and retaining the ownership (refuted rumors of selling stake).

In our view, better customer acquisition/retention activity and some help from gold prices is required for envisaged growth in gold loans.

Continuance of strong micro finance institution cycle and completion of significant capital raise in Asirvad would be a key catalyst for the stock, besides sustained strong growth and profitability improvement in non-fold loan and non-MFI businesses.

On consolidated basis, a reasonably brisk AUM growth and likely continuance of moderate credit cycle in non-gold loan portfolios would underpin 18-19% RoE delivery over FY24-26.

Notwithstanding the recent upmove, Manappuram still trades at an undemanding valuation of five times price/earning and one time price /adjusted book value on FY26 estimates.

We retain 'Buy' and raise 12 million target price to Rs 210.

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