Buy Manappuram Finance; target of Rs 180: Motilal Oswal

Motilal Oswal is bullish on Manappuram Finance recommended buy rating on the stock with a target price of Rs 180 in its research report dated August 10, 2023.

Broker Research

August 16, 2023 / 13:48 IST

Buy

26 Aug, 2025 12:21

Volume

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Motilal Oswal's research report on Manappuram Finance

Manappuram Finance (MGFL)’s 1QFY24 consolidated PAT jumped 77% YoY to ~INR5b aided by NIM expansion and higher other income. NII grew 35% YoY to ~INR12.9b and PPOP rose ~58% YoY to ~INR8b. Annualized credit costsrose to 1.3% (PQ: 0.6%; PY: 1.7%) mainly due to higher credit costs in the MFI business. The company reported a ~4% QoQ growth in gold AUM to ~INR206b and we believe that this growth trajectory will sustain in the near term. Gold loan yields in 1QFY24 improved to ~21.6% (PQ: 21.0%). Consolidated NIM expanded ~90bp QoQ to 14.8% despite a ~60bp QoQ increase in borrowing costs. We model an improvement in gold loan yields for the next two quarters and stabilization thereafter. To mitigate the cyclicality in gold loan segment, MGFL has been actively diversifying into non-gold segments with the share of non-gold products in the company's AUM mix at 44% (PY: 33%). We believe MGFL should tread carefully in the non-gold segments as it is yet to exhibit any clear ‘right to win’ in these segments.

Outlook

We raise our FY24E/FY25E EPS by ~9%/8% to factor in stronger growth in the non-gold segments and higher NIM. We estimate an 11%/20% AUM CAGR in gold/consolidated book, over FY23-25. We model a consolidated PAT CAGR of ~29% over the same period to arrive at a consolidated RoA/ RoE of ~4.8%/20% in FY25. Reiterate BUY with a TP of INR180 (based on 1.1x FY25E consolidated BVPS).

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