Manappuram Finance stock jumps 10% as net profit grows 37% in Q2; brokerages remain divided on the stock

Shares of Manappuram Finance, an NBFC firm, rallied sharply in Wednesday’s trading session as investors responded positively to the company’s Q2FY24 performance. The company on Monday reported a 37% YoY jump in its consolidated net profit at 560.65 crore. In the corresponding quarter of last year, the company recorded a net profit of 409.5 crore.

Sequentially, net profit increased by 12.6%, compared to 498.02 crore in the quarter ended June 2023. It reported a 25% improvement in net interest income at 1,468 crore against 1,168 crore was reported in Q2 FY23.

Total revenue during the quarter came in at 2,174 crore, an increase of 27% compared to 1,714 crore in the same period last year. In terms of segment, the ‘gold, loan and other’ business category contributed 1,537.22 crore in Q2 FY24 of total revenue, with ‘micro-finance’ added 636.80 crore.

Also read: Manappuram Finance Q2 Result: Net profit jumped 37% to 561 crore; interim dividend declared

In terms of asset quality, GNPA improved to 1.6% from 2% in Q2FY23, while net NPA fell to 1.4% in Q2FY24 from 1.8% in the year-ago period.

A QoQ increase of around 1% and an 8% increase in Assets Under Management (AUM) were seen, reaching approx. 20,800 crore. The quantity of gold measured in tonnage remained relatively stable at 59.4 tonnes compared to the previous quarter.

Also read: Gold rate rises today as soft US inflation data drags US dollar index to 10-week low

Following the company’s Q2FY24 numbers, the shares opened strongly in today’s trading session at 153.50 apiece compared to its previous closing price 140.35 apiece and further strengthen that 154.35 apiece, marking a significant gain of 10%.

Home broking firm Motilal Oswal has revised its FY24E/FY25E EPS up by 5%/6%. This adjustment represents strong growth prospects in non-gold segments and an increase in other income. The brokerage projects a 10%/20% CAGR in AUM for gold/consolidated book over FY23 and FY26.

In addition, it projects a profit after tax (PAT) CAGR of around 27% over the same period. These adjustments resulted in estimated consolidated RoA and RoE of approximately 5.0% and 20% in FY26.

Also read: The US Dollar fell by the most in a year as traders bet on the end of US rises

“Management has demonstrated that they will not pursue loan growth at the expense of sheet compression, which we believe will continue to be a driver of higher profitability. MGFL trades at 0.8x Sep’25E P/BV, and we believe there will be scope for a re-rating in valuation multiples for a franchise that can deliver a sustainable RoE of 20%,” the brokerage said.

The brokerage indicated that the risk reward for Manappuram Finance is favourable, hence maintaining its ‘buy’ rating with a target price of 180 each.

Also read: These four Jewelery stocks have returned up to 230% since last Diwali, What’s next?

On the other hand, Dolat Capital maintained its ‘Reduce’ call on the stock with a target price of 155 apiece, valuing the standalone at 1x Sep-25E ABV and the MFI book at 1.4x PBV.

“We remain concerned about weakness in the core business of gold and non-gold franchises on average,” the brokerage said.

At 10:15 AM, the stock was trading with a gain of 8.87% at 152.75 each.

Disclaimer: The opinions and recommendations of the individual analysts presented in this article are. These do not reflect the views of the Mint. We encourage investors to check with certified experts before making any investment decision.

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Updated: 15 November 2023, 10:26 AM IST

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