Broker's call: Manappuram Fin (Buy)

BL Chennai Bureau | Updated on: Jun 27, 2022

Prabhudas Lilladher

Target: ₹126

CMP: ₹ 88.9

Manappuram Finance has been the victim of intense competition (organised/non-organised) and resultantly Q4-FY22 saw shrinkage in yields (150bps QoQ). Both tonnage and gold AUM de-grew 3 per cent and 1.4 per cent q-o-q, although they grew by 4 per cent and 5.7 per cent y-o-y. Asset quality also deteriorated as standalone GNPA and NNPA rose to 3 per cent and 2.7 per cent from 1.4 per cent/1 per cent in Q3’22.

The management clarified that an accounting change to align with IRAC norms resulted in higher GNPA and should soon normalise in coming quarters.

Going forward, it . expects branch productivity in-line with 20 per cent targeted loan growth to compensate likely pressures on spreads. Intense competition in gold loan business and lack of demand from weaker section of society will continue to put pressure on yields. From highs of 23 per cent gold loan yield, 18-19 per cent can be the new normal.

We maintain AUM growth estimates at 15-20 per cent, lower the yields with NIMs declining to 13.8 per cent from about 16 per cent in FY21 and maintain GNPA forecasts at 2.8 per cent/2.4 per cent over FY23 to FY24. Reiterate ‘Buy’ rating as valuation is attractive with price target reduced to ₹126 from ₹151.

Published on June 27, 2022
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