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