Accumulate Manappuram Finance; target of Rs 193: Prabhudas Lilladher

Prabhudas Lilladher recommended accumulate rating on Manappuram Finance with a target price of Rs 193 in its research report dated January 30, 2021.

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Prabhudas Lilladher’s research report on Manappuram Finance

Q3FY21 proved to be a healthy quarter. While higher customer accretion and gold price uptick supported healthy gold loan traction, the momentum is expected to sustain as Co. aims to expand in North (300 branches to be pend over next 1-year subject to regulatory approval). However, asset quality for non-gold businesses is not yet out of woods as (a)MFI asset quality improvement was largely supported by higher write-offs (at Rs680mn up from Rs380mn a quarter ago) (b)lower billing collection at 85% (c) geographic led asset quality vulnerability (d) vehicle finance book depicting high single digit NPAs (8%). Said that, levers to return profile uptick exist (~4.5%RoA/24%RoE: over FY21-FY23) despite higher provisioning requirement as same should be offset by (a)continued gold loan traction (19%CAGR) buoyed by branch/customer accretion (b)steady-state margin (13.5-14%) over FY21-23 as Co. shifts to low cost borrowing mix.

Outlook

Maintain ACCUMULATE with price target of Rs193 as we value the Co. at 1.6x consolidated PABV Mar’23E.

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