Motilal Oswal has given Buy recommendation for Manappuram Finance recommended buy rating on the stock with a target price of Rs 130 in its researc with a target price of Rs. 130 in its research report issued on May 19, 2022

Motilal Oswal’s research report on Manappuram Finance

Over the last three quarters, MGFL traded off margin and spreads for Gold loan growth. This naturally dented profitability, with FY22 PAT declining by 23% YoY. The management said it would prioritize profitability over the relentless pursuit of loan growth in FY23. We would like to highlight: a) Gold loan demand remains muted, particularly in the low-ticket size segments, leaving little alternative for Gold loan NBFCs but to compete in the higher-ticket size segments; b) In the current demand environment, loan growth will be a casualty, if priority shifts to spreads and margins; c) We see some rationality returning in lending/teaser interest rates, but the Gold loan NBFC business is never again going to be ~16% NIM business model. These are cyclical lows and the muted Gold loan growth and potential margin compressions are already reflected in the current valuations of 0.8x FY24E P/BV.

Outlook

We maintain our Buy rating with a TP of INR130/share (based on 1x FY24E P/BV).

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