Motilal Oswal's research report on Manappuram Finance
Manappuram Finance (MGFL)’s consol. PAT grew ~12% YoY, but declined ~1% QoQ to ~INR5.6b (in line) in 1QFY25. NII grew ~19% YoY to ~INR15.4b (in line), and PPoP rose ~22% YoY to ~INR9.8b (in line) during the quarter. Consol. credit costs stood at ~INR2.3b. Annualized credit costs for the quarter rose ~30bp QoQ to 2.1% (v/s PQ: ~1.8%). Higher credit costs were primarily attributable to the MFI business. Gold AUM grew ~10% QoQ and ~15% YoY to ~INR236b. Net yields on Gold loans declined ~30bp to ~22.2% (PQ: ~22.5%). However, net yields on the standalone business rose ~10bp QoQ to 21.8%. Standalone CoB increased ~20bp QoQ to 9.0%, resulting in a sequential compression in NIM.
Outlook
MGFL trades at 1.1x FY26E P/BV, and we believe that there is scope for a re-rating in valuation multiples for a franchise that can deliver a sustainable RoE of ~19-20%. Reiterate BUY (as the risk-reward is still favorable at a valuation of 1.1x FY26E P/BV) with a TP of INR250 (based on 1.3x FY26E consolidated BVPS).
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