Prabhudas Lilladher has given Accumulate recommendation for Manappuram Finance with a target price of Rs. 187 in its research report issued on May 26, 2021

Prabhudas Lilladher’s research report on Manappuram Finance

Q4FY21 proved to be a mixed performance. While MGFL gold AUMs 12% YoY growth stood in-line with guidance, auctions surge (Rs4040Mn vs Rs80mn: 9MFY21) and tonnage decline (-4.3%QoQ) stood stark for Q4FY21. Short tenure loan policy (3-month) implied upfront loss recognition on account of gold price correction that reflected in tonnage shrinkage. However, gold loan borrowers comprising of small business entrepreneurs have been facing the brunt of the second wave. MFI NPAs stood steady QoQ at 2.5%, however, Apr-May’21 weak collections (7-8% dip from 101%: Mar’21) led by second wave should dampen the asset quality prospects for the current fiscal. Vehicle finance business (5% NPA) should continue to face near term stress too. Against this backdrop, we prune down our growth estimates to 15%/19% (earlier 19%/22%) and tweak GNPA estimates higher to 1.9%/1.7% (earlier 1.5%/1.4%) for FY22/23.

Outlook

Subsequently, our EPS stands marginally down by 1%/4% for FY22/23. As Co.’s high yielding book continues to promise high return ratios, we maintain Accumulate rating on the stock with a price target of Rs 187 (earlier Rs193) valuing the consolidated book at 1.6x PABV FY23E.