Manappuram Finance - Q2 FY21 Result Update - YES Securities

Manappuram Finance (Q2 FY21) - BUY (Target Rs225, Upside 38.8%)

Fortified by Gold Loans; retain BUY with 12m PT of Rs225

MGFL delivered stronger-than-expected earnings performance in Q2 FY21 driven by sustained strong growth momentum in gold loans (flat tonnage qoq was a better show than the larger peer), funding cost decline and portfolio mix shift led margin expansion and lower-than-expected provisions (management's expectation of sustained improvement in collection efficiency in non-gold businesses). However, we see the billing collection trends (w/o arrears and foreclosures) in MFI and CV portfolio as being weaker than peer companies in these segments. Thus, we retain our conservative loan loss outcomes in microfinance (7.5%), vehicle finance (6%) and housing finance (4%) businesses. Notwithstanding this, we estimate MGFL to deliver 5% RoA in the current year on the back of solid profitability in gold loans.

As credit cost would be much lower in non-gold segments during FY22, the consol. RoA could climb above 5.5%. RoE delivery would be sturdy at 24-25% in FY21/22 with improving capitalization levels (AUM growth substantially lower than RoE). In this context, stock's valuation is attractive at 1.6x P/ABV and 7x P/E on our FY22 estimates. Re-iterate BUY with an unchanged 12m TP of Rs225.

YES Securities - Manappuram Finance (Q2 FY21) - 20201109

Shares of MANAPPURAM FINANCE LTD. was last trading in BSE at Rs.159.75 as compared to the previous close of Rs. 162.3. The total number of shares traded during the day was 241794 in over 2882 trades.

The stock hit an intraday high of Rs. 164.5 and intraday low of 158.3. The net turnover during the day was Rs. 38869753.

Source : Equity Bulls

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