Manappuram Finance - In-line results; uncertainty remains - Ambit

Manappuram Finance (MGFL) recorded a net profit of Rs528mn in 1QFY14 vs net losses of Rs1.4bn in 4QFY13, in line with our expectations. The company's loan book declined 8% QoQ to Rs91.5bn primarily due to the decrease in gold prices. NIMs increased to its earlier levels of ~12% (vs ~1% in 4QFY13), as there were no interest rate reversals during the quarter and cost of funds remained stable at ~13%. The company made provisions of Rs552mn during the quarter (annualised 2.31% of the loan book) for future interest rate reversals on the loans.

We believe that the company is still not out of the woods and a combination of factors would keep the company's RoEs in the low single digits for the next two years. We reiterate our SELL stance with a target price of Rs14/share (implied FY14 adjusted P/B of 0.4x and FY14 adjusted P/E of 13.0x).

Source : Equity Bulls

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