Accumulate Manappuram Finance; target of Rs 184: Arihant Capital

Arihant Capital 's research report on Manappuram Finance

Manappuram Finance (MFL) reported weak performance in terms of asset quality and growth front, led by its non-gold business. However, operating performance of the Company remained healthy. Gold loan business of the Company continued to remain strong. NII for the quarter grew by 19% YoY to Rs 946 cr, led by 26% YoY growth in consolidated AUM. Healthy NII growth and cost optimization bolstered operating profit growth at 41% YoY to Rs 638 cr. Cost to Income ratio came down by 384 bps QoQ to 32.9%. Profit during the quarter increased by 35% YoY to Rs 368 cr, but it has declined by 8% QoQ, due to 19% QoQ increase in provisions at Rs 145 cr. GNPA ratio increased to 1.3% from 0.9% in Q4FY20.

Outlook

We value the stock at 1.8x P/ABV to its FY22E ABV of Rs 102 and arrive at a fair value of Rs 184 per share. We downgrade our rating to Accumulate from Buy.

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