Manappuram Finance Ltd. share price target

Even as AUM picked up momentum, Net Interest Income for the quarter showed a decline of 7.2% QoQ and 11.6% YoY owing to lower margins. Interest income declined 2.2% QoQ and 9.2% YoY while interest expense grew 7.9% QoQ while declining 4.7% YoY. Decline in income is attributed to lower yield as company focused on large ticket loans with lower interest rate. During the quarter, the company increased their advertisement spend and employee incentives with a view capture the market. This has resulted in higher operational expenditure during the quarter. As a result, the pre-provision expenditure of the company...

In the last two quarters, MGFL traded off margin/spreads for Gold loan growth. This new business strategy helped it cover a lot of lost ground in terms of market share, with a cumulative Gold loan growth of ~24% over 2Q and 3QFY22. This new strategy also meant: a) elevated advertising/promotion costs and incentives for employees translating in higher operating expenses, and b) compression in spreads to ~11.5% v/s 14.5-15% under its earlier high yielding business model. At this juncture, MGFL can neither afford such high operating expenses, nor can it cut yields further to match the...

On inexpensive valuations, we maintain our BUY rating with a revised target price of Rs 190/share (1.4x FY24E ABV).

Manappuram Finance (MGFL) is one of the leading gold loan NBFCs in India and is well diversified into other business segments like housing loan, vehicle loan and microfinance, with a branch network size of around 4,623 spread across the country Total AUM grew by 5.6% YoY and 14.8% QoQ as Gold AUM grew 13.2% YoY while Non-Gold AUM grew 18.2% YoY. The growth in AUM was by compromising yield as MFL focused on...

However, on attractive valuations and improved growth prospects, we revise our rating from HOLD to BUY with a target price of Rs 230 (1.5x FY24E ABV).

tonnage grew 11%QoQ and gold loans 13% QoQ after a lull period of over 3 quarters in a row. Co. also saw shifting to 6-month gold loan tenure product from 3-month for better asset quality management. While standalone NPAs...

PPOP (7% miss) declined by 8% YoY and 15% QoQ to INR6b. Credit costs remained elevated in the MFI subsidiary due to the impact of the second COVID wave. We expect credit costs to remain elevated in 3Q and moderate from 4QFY22 onwards. While MGFL demonstrated greater sequential Gold loan growth (~13% QoQ) by effectively winning over higher ticket Gold loan customers, this has come at the cost of compression in spreads and large incentives paid to employees. MGFL has embarked on a change in its business model and has...

Manappuram Finance (MGFL) is one of the leading gold loan NBFCs in India and is well diversified into other business segments like housing loan, vehicle loan and microfinance, with a branch network size of around 4,623 spread across the country Total AUM de-grew by 2.3% YoY and 9.1% QoQ as Gold AUM was...

Manappuram Finance (MGFL) results surprised negatively with a sharp decline in gold AUM and higher auctioning. Healthy revenue/earnings growth, traction in its MFI portfolio, improved CE in July, and new clientele addition were key positives. Q2/ H2FY22 will be a quarter of test and define the strength of the business model for the gold financiers. We expect MGFL to navigate well as it has resorted to auctioning (vs. recognizing it as NPA) given its product design. We like MGFL for its diversified balance sheet, healthy revenue/earnings growth, and superior return ratios. Retain BUY with...

Gold lending is a high moat business and we believe specialists like MGFL will continue to benefit. However, most positives are priced in. We revise our rating from BUY to HOLD with a target price of Rs 185 (1.4x FY23E ABV).