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Manappuram Finance shares crack 12%; Arihant Capital downgrades stock to hold after Q1 numbers

Brokerage firm Motilal Oswal Financial Services has maintained a buy call on the stock after the Q1 numbers, with a target price of Rs 220.

August 11, 2021 / 04:46 PM IST
 
 
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Despite a 26 percent jump in Q1 net profit, shares of Manappuram Finance cracked as much as 15 percent in intraday trade on BSE on August 11, but pared some losses to close the day 12 percent lower. This is the fourth consecutive day of losses for the counter.

Meanwhile, brokerages have a mixed view on the stock.

On August 10, the company reported a nearly 26 percent rise in its consolidated net profit at Rs 417 crore for the first quarter of the current fiscal year 2021-22 on healthy growth in interest income aided by a fall in borrowing cost.

Income from operations was up by 3.4 percent to Rs 1,565 crore in Q1FY22 as against Rs 1,513 crore in Q1FY21, Manappuram Finance said in a regulatory filing.

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The numbers were announced during the market hours and the stock settled 5 percent lower on BSE.

Brokerage firm Motilal Oswal Financial Services has maintained a buy call on the stock after the Q1 numbers, with a target price of Rs 220.

The brokerage firm pointed out that the performances of Muthoot Finance and Manappuram Finance, in terms of growth in the core gold loan book and gold holdings, have been divergent over the last two quarters.

This is in part to do with the average tenure of their primary gold loan products, Motilal Oswal said.

"Despite this, we appreciate that Manappuram Finance as a franchise has made considerable progress in its appraisal, security infrastructure, and other processes over the last three years, and remains poised for a decent consolidated AUM CAGR of nearly 13 percent over FY21–24E," Motilal Oswal said.

The brokerage firm estimates the company's consolidated RoA (return on assets) and RoE (return on equity) of 6.3 percent and 22 percent, respectively, over the medium term.

Arihant Capital has downgraded the stock to ‘hold’ from ‘buy’ with a revised target price of Rs 201 from Rs 197 earlier, based on 1.6 times FY23E P/ABV.

"Decline in gold loan segment is a one time blip due to LTV management (LTV reduced from 71 percent in Q4FY21 to 63 percent as on Jul’21) and decline in new customer acquisition. The short loan tenure (three months versus the industry average of 6-12 months) is resulting in a quicker downward re-pricing and high auctions," Arihant Capital said in a report.

The brokerage firm expects the company to deliver steady gold loan growth of 12 percent in FY22E and it has potential to deliver RoA and RoE of 5.4 percent and 21 percent, respectively, by FY23E.

"We have cut our EPS estimates by 11 percent and 10 percent for FY22E and FY23E, respectively, to factor in decline in gold loan AUM/yield," Arihant Capital said.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Nishant Kumar
first published: Aug 11, 2021 02:58 pm

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