Manappuram Finance Q2 Review: Analysts See Headroom For Growth After Profit Beat
The company's Q2 standalone net profit increased 20.6% year-on-year to Rs 420 crore, beating Bloomberg estimated of Rs 389.6 crore
Shares of Manappuram Finance Ltd. surged over 8% on Wednesday after its second-quarter profit beat analysts' estimates and as analysts sees sufficient headroom for growth in both gold loan and microfinance businesses.
The Kerala-based gold financier's standalone net profit increased 20.6% year-on-year to Rs 420 crore in the quarter ended September, according to a regulatory filing issued on Monday. Analysts polled by Bloomberg estimated a standalone net profit of Rs 389.6 crore. Sequentially, the profit was up 10.2%.
Morgan Stanley believes the stock is at an inflection point, with consecutive quarters of quarter-on-quarter growth in the gold loan book and non-gold business (47% of AUM) delivering strong growth.
"We expect ROE to improve to 19.7% in FY25 from 16.7% in FY23", the research firm said in Nov. 14 note.
Here's What Analyst Have To Say About The Earnings
Morgan Stanley
Morgan Stanley maintained an 'overweight' rating on the stock and raised the target price to Rs 200, implying an upside retune potential of 43%.
"We make marginal upgrades to our NII and other income estimates based on the second quarter of FY24 performance".
The research firm's FY24 credit cost estimate rises as it factors in the higher 2QFY24 provision in Asirvad MFI.
The company's consolidated profit beat estimates, driven by non-interest income. Higher than expected assignment income at Asirvad MFI, assignment of non-gold loans in the standalone business, and higher fee income
"We also build in lower assignment income in subsidiary Asirvad MFI vs. H1FY24 performance, given the episodic nature of loan assignment. These could be potential upside risks to total income.
Motilal Oswal Financial Services
Motilal Oswal reiterated a 'buy' with a target price of Rs 180, implying an upside of 18.42%.
Guided by gold loan growth of 8–10% year-on-year in FY24, it will continue to maintain pricing discipline.
Growth momentum in MFI will remain strong; it is sufficiently capitalised for growth in FY24.
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 company's AUM mix at 47% (vs. 37% in 2QFY23).
"We believe MGFL should tread carefully in the non-gold segments, as it has yet to exhibit any clear ‘right to win’ in these segments."
IDBI Capital
IDBI Capital largely maintained the estimates for FY25E and maintained a 'buy' rating with a target price of Rs 175.
Competition intensity impacted AUM growth as well as margins.
"However, H1FY24 reflected an improvement in margins. We believe that the company has the potential to report RoA above 3.5%".
IDBI Capital noted that the management believes that the credit needs in gold loans as well as microfinance businesses are large; hence, there is sufficient headroom for growth in these segments despite the competition from banks and NBFCs.
Shares of the company rose as much as 9.98% to Rs. 154.35 a piece. It is trading 8.07% higher at Rs 151.70 apiece as of 11:36 p.m. This compares to a 0.91% advance in the NSE Nifty 50 Index.
It has risen 30.43% on a year-to-date basis. Total traded volume so far in the day stood at 12 times its 30-day average. The relative strength index was at 66 as of 11:30 a.m.
Out of 20 analysts tracking the company, 16 maintain a 'buy' rating, one recommends a 'hold', and three suggest 'sell', according to Bloomberg data. The average 12-month consensus price target implies an upside of 13.8%.
