Buy Manappuram Finance; target of Rs 215: Geojit

Geojit's research report on Manappuram Finance

Manappuram Finance Ltd. (MGFL) is one of the leading gold loan NBFCs in India. MGFL has also diversified into other business segments like housing loan, vehicle loan and microfinance, with a branch network size of around 5,000 spread across the country. Consolidated assets under management (AUM) grew by 27% YoY to Rs. 40,385cr, with the gold loan AUM at Rs. 20,758cr(+12% YoY) and the non-gold segment reaching Rs. 19,627cr (+48% YoY). In Q3FY24, consolidated net profit reached Rs. 575cr, marking 46% YoY growth, largely driven by the profitability in the gold loan business. Net interest income (NII) for the quarter grew by 33% YoY, supported by a quarterly 50bps improvement in gold yield, contributing to higher yields from the gold book. Risk weights on bank lending to NBFCs increased by 25 bps, raising borrowing costs by 20 bps due to a higher proportion of term loans. Despite this, Net Interest Margin (NIM) improved by 37 bps to 16.7%.

Outlook

In anticipation of the short-term impact of rising borrowing and credit costs, we expect the company to address these challenges by expanding its AUM mix, particularly in the non-gold segment, and enhancing asset quality. Hence, we reiterate BUY rating with a target price of Rs. 215, based on a 1.12x adjusted BVPS of FY26E.