Manappuram Finance - Q1FY23 Result Update - Decent AUM Growth, Yield Improvement Seen - BUY

Mr. Akshay Ashok - Research Analyst at Prabhudas Lilladher Pvt Ltd.

Quick Pointers:

- Gold Loan yield in Q1FY23 rises to 19.4% v/s 18.8% in Q4FY22.

MGFL reported good set of numbers with profitability beating our estimates at Rs2.8bn (Ple:Rs2.6bn) on better than expected NII which came in at Rs9.5bn (PLe: Rs9.3bn) up 6.5% QoQ but de-growing 7% YoY (because yield on gold loans improved to 19.4% in Q1FY23 v/s 18.8% in Q4FY22). Gold AUM grew 1.5% QoQ to Rs204bn. Asset quality for standalone business improved significantly as GNPA/NNPA fell to 1.4%/1.3% from 3%/2.7% in Q4FY22. Asirvad Microfinance performance continued to be under pressure as microfinance AUM de-grew 1.6% QoQ to Rs65.4bn and asset quality also deteriorated due to stress in restructured book with GNPA/NNPA coming in at 7.7%/1.9% vs 3.5%/0.2% in Q4FY22.

Going forward, Co. expects yields to not fall below 20-21% and can expand AUM without reducing yields or introducing teaser rates. From highs of 23% gold loan yield, 20-21% can be the new normal. We maintain AUM CAGR of 15% for FY22-24 and GNPA forecasts of 2.8%/2.4% over FY23/24. Worst seems to be over in terms of pricing pressure in the gold loan business, but Asirvad microfinance business continues to lag in AUM growth and asset quality. Reiterate 'BUY' rating as valuation is attractive at 0.8x FY24 P/ABV with price target maintained at Rs126, valuing the consolidated book at 1.1x PABV Sep'24E.

Decent loan growth, better yields and lower provisions aid PAT: AUMs at Rs307bn reported growth of 24.3%YoY and 1.6%QoQ as gold loans grew 1.5% QoQ. MFI AUMs de-grew 1.6% QoQ, VF AUMs grew 6.8% and HLs grew by 3.5%QoQ and other loans including MSME saw a strong 17% QoQ growth. PAT beat our estimates as yields improved and provisions came down by 15% QoQ. Opex came down by 0.4% on a QoQ basis. NIM improved to 12.5% from 11.8% in Q4FY22 due to better yields.

Asset quality improves for gold business, but deteriorates in Asirvad: GNPA at 1.4% for standalone business (gold) down from 3.0% in Q4FY22. MFI business also saw a rise in GNPA to 7.7% vs 3.5% in Q4'22 as stress was seen in restructured book. For housing, GNPAs was stable at 5.9% vs 5.9% (Q4FY22) and vehicle finance GNPAs reduced to 4% vs 6.7% last quarter. Asset quality should improve and we maintain GNPA forecasts at 2.8-2.4% over FY23 to FY24. Management believes that they are the end of COVID-related provisioning cycle in Asirvad and expect material reduction in credit costs, going forward.

Shares of Manappuram Finance Limited was last trading in BSE at Rs. 101.65 as compared to the previous close of Rs. 101.95. The total number of shares traded during the day was 755684 in over 5642 trades.

The stock hit an intraday high of Rs. 103.85 and intraday low of 99.10. The net turnover during the day was Rs. 76710987.00.

Source : Equity Bulls

Keywords

ManappuramFinance INE522D01027 Q1FY23 ResultUpdate PrabhudasLilladher