Prabhudas Lilladher's research report on Manappuram Finance
MGFL reported good set of numbers with profitability beating our estimates at Rs4.0bn (Ple:Rs3.2bn) on better than expected NII which came in at Rs10.7bn (PLe: Rs10.2bn) up 12.8% QoQ and 9.4% YoY (because yield on gold loans improved sharply to 21.9% in Q2FY23 v/s 19.4% in Q1FY23). Gold AUM de-grew 6.3% QoQ to Rs191bn. Gold AUM growth was impacted due to rationalization of low yielding segments(<12% yield). Asset quality for standalone business deteriorated as GNPA/NNPA rose to 2.0%/1.8% from 1.4%/1.3% in Q1FY23. Asirvad Microfinance performance was very strong as microfinance AUM grew 8.7% QoQ to Rs71.1bn. The parent, Manappuram, infused Rs2.5bn capital in Sep’22 in Asirvad. Management has guided for further reduction in credit costs and return to pre-COVID provisioning levels over coming quarters in Asirvad. Going forward, Co. expects yields to not fall below 21-22% helped by robust rural demand and phasing out of low yield products. But it is becoming clear that at least this year it is going to be tough to achieve yield improvement and gold AUM together. We reduce our AUM CAGR to 10% from 15% for FY22-24.We also increase the gold loan yield to 21%/22% from 19%/20% for FY23/24 leading to FY23/24 EPS estimates being raised by 3%/5% respectively. Meaningful gold AUM growth at these yields could start coming in from Q4FY23.
Reiterate ‘BUY’ rating as valuation continues to be attractive at 1.0x FY24 P/ABV with price target raised to Rs 144 from Rs126, valuing the consolidated book at 1.1x PABV Sep’24E.