Shares of Manappuram Finance slid over 3 percent to Rs 199.7 on August 14 after the company reported Q1FY25 results that fell short of expectations. Despite this dip, analysts remain optimistic about the stock, anticipating gains from rising gold prices.
Jefferies maintained a 'buy' rating on Manappuram Finance, setting a target price of Rs 270 per share. They believe the company will benefit from increasing gold prices and expansion in its non-gold portfolio. Moreover, they suggest that the current stock price already accounts for concerns about financial stress in microfinance and non-gold loan segments.
Similarly, Morgan Stanley has rated Manappuram Finance 'overweight' with a target price of Rs 245 per share. They view the management's revised gold loan growth forecast for FY25—from 12-13 percent to 15 percent—as a strong positive indicator.
ALSO READ: Manappuram Finance's Q1 net profit rises 12% to Rs 555 cr on strong gold loan growth
In terms of performance, the company's profit after tax (PAT) for Q1 rose 12 percent year-on-year but was 3 percent below forecasts, according to Jefferies. The standalone net interest margin (NIM), which reflects the difference between interest earned on loans and interest paid on borrowings, also fell short of expectations due to increased borrowing during the quarter.
On a brighter note, revenue from Manappuram's gold loan and other businesses increased by 23.5 percent to Rs 1,737 crore, and its microfinance segment saw an 18 percent revenue boost to Rs 775 crore.
The rising price of gold enhances the value of pledged gold collateral, fueling growth as more customers seek loans against these higher-valued assets. Assets under management (AUM) climbed 21.2 percent year-on-year to Rs 44,900 crore, with gold AUM growing approximately 10 percent quarter-on-quarter and 15 percent year-on-year to Rs 23,600 crore as of June.
Although the Union Budget has reduced the customs duty on gold from about 15 percent to 6 percent—which may affect domestic gold prices—the increased volume of gold is expected to benefit Manappuram Finance and other gold lenders, said Motilal Oswal analysts as they reiterated a 'buy' recommendation, with a target price of Rs 250.
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