Arihant Capital has given Buy recommendation for Manappuram Finance with a target price of Rs. 160 in its research report issued on Feb 15, 2022

Arihant Capital’s research report on Manappuram Finance

Manappuram Finance (MFL) reported weak set of numbers during Q3FY22 with profit of INR 261 cr was 35% lower than our estimate of INR 412 cr, impacted due to shift from high yield to lower yielding gold loans coupled with increased cost on account of aggressive marketing efforts/ad-spends. To gain lost share of high ticket customer base and to compete with peers, company has changed its strategy and reduced the yield which has impacted the margin/spreads. Yield on advances of the company declined from 26% in Q1FY22 to 20.3% as on Q3FY22. Also, company has started promotional activities with advertising and incentives for employees translating in higher operating expense. Due to this change in business model, gold loan AUM of the company increased by 9% QoQ but it is coming at a lower rate which has impacted the spread and profitability. At current juncture, company is trying to maintain its market share and expect yield to maintain at ~21%.

Outlook

We reduce our target multiple on the stock and upgrade our rating on the stock to Buy with a revised TP of INR 160 (INR 219 earlier), based on 1.2x FY24E ABVPS.

More Info on Trent

At 17:30 Manappuram Finance was quoting at Rs 126.00, down Rs 1.60, or 1.25 percent.

It has touched an intraday high of Rs 131.50 and an intraday low of Rs 124.65.

It was trading with volumes of 1,237,099 shares, compared to its thirty day average of 493,298 shares, an increase of 150.78 percent.

In the previous trading session, the share closed down 10.77 percent or Rs 15.40 at Rs 127.60.

The share touched its 52-week high Rs 224.40 and 52-week low Rs 122.00 on 10 November, 2021 and 15 February, 2022, respectively.

Currently, it is trading 43.85 percent below its 52-week high and 3.28 percent above its 52-week low.

Market capitalisation stands at Rs 10,664.57 crore.

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