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Accumulate Manappuram Finance; target of Rs 195: Prabhudas Lilladher

Prabhudas Lilladher recommended accumulate rating on Manappuram Finance with a target price of Rs 195 in its research report dated December 30, 2019.

December 30, 2019 / 04:24 PM IST
 
 
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Prabhudas Lilladher's research report on Manappuram Finance


We are initiating coverage on Manappuram Finance (MGFL) with an Accumulate rating given strong moat in gold loan business (11%CAGR over FY20-22, secured lending, brisk asset liquidation) and rising scalability of non-gold business. MGFL stands in a sweet spot underpinned by low leverage (<5x) and effective asset liability management (ALM). We estimate 20% AUM CAGR, operating leverage (~145bps cost-income decline) and prudent asset quality (~0.8% GNPA/credit costs) over FY20-22E. The recent valuation uptick has been factoring in the higher yielding business (87% of total) expansion that is expected to fetch higher returns (5.1%RoA/18.9%RoE: FY22E). However, any further re-rating is function of non-gold business scalability and delinquency control across new business cycles.


Outlook


Hence, we recommend Accumulate rating valuing consolidated business at 1.9x PABVSep'21E arriving at price target of Rs 195.


For all recommendations report, click here


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first published: Dec 30, 2019 04:24 pm

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