Mannapuram Finance is somewhat lukewarm presently probably because of
concerns relating to loan waiver and the micro-finance segment.
However, given its credentials as a powerhouse, it is only a question of time before the stock resumes its upward trajectory and brings cheer to investors.
Edelweiss has foreseen a target price of Rs. 120 on the following rationale:
“We see growth levers: a) stabilising gold prices; b) gap in AUM/gram (INR1,821 versus incremental lending at INR1,900-2,000); and c) stabilising auctions to aid growth. However, following lower AUM base set in FY17 and uncertainty following new rule of cash disbursements being restricted to INR20k, along with higher opex, we prune our FY18/FY19 earnings estimates by 6%/10%. Further push will come from scale up of other businesses, which will drive re-rating. The stock is trading at 1.7x FY19E P/BV (consolidated). We maintain ‘BUY/SO’ with TP of INR120.”
Sridhar Sivaram of Enam Holdings has also given a clean chit to all gold loan companies on the basis that they are secured lending with 4.5 percent return on assets (RoA) and 23 percent return on equity (RoE).
AK Prabhakar of IDBI Capital has opined that the market is not giving the right valuation to the business. He emphasized that Manappuram Finance is one of the two gold finance companies with a panIndia presence and is trading at 2.5 times book value, which is attractive. He opined that the stock can give 20-25% return in one year.
Manappuram Finance’s (MGFL) Q4FY17 numbers came below trend as
demonetisation and political interference impacted gold loans and MFI
business. While gold loan disbursements normalised a tad (up 1.7% QoQ),
higher auctions (bunched up in Q4FY17) led to AUM dip of >9% QoQ to
INR111bn. MFI business reported a loss of ~INR75mn as GNPLs rose sharply
to 4.7% (0.16% in Q3FY17) leading to higher provisioning of INR396mn
(up > 10x YoY). Meanwhile, other businesses (home loans, CV loans)
posted impressive growth. Diversification will entail lower risks of
mono-line business model. Maintain ‘BUY.
Higher auctions dent AUMs; NIMs sustained
Disbursements in Q4FY17 stood at INR123bn (up ~1.7% QoQ); however, higher auctions (INR7.9bn, bunched up in Q4FY17) led to >9% QoQ dip in gold AUMs. Meanwhile, underrecoveries were minuscule due to tilt towards shorter-duration loans. Sustained yields, along with better funding cost, bolstered revenue momentum. Management expects demonetisation impact to wane in FY18 and growth to normalise. Notably, other businesses—MFI book touched INR18bn and home loans & CVs at >INR3bn each—are making good progress. MGFL aims to take proportion of new business to 25% (~19% currently) by FY18 and 50% by FY20 with overall loan CAGR target of 20%.
Asset quality: Gold loans recovering gradually, MFI under pressure
With aggressive auctions during the quarter, GNPLs in gold business dipped to 2.0% (2.3% in Q3FY17), indicating softer recovery trend. Meanwhile, GNPLs in MFI business spiked to 4.7% (0.16% in Q3FY17) with stress largely flowing from Karnataka (MGFL has limited exposure to other stressed states of UP & Maharashtra), which along with aggressive provisioning policy, took a toll on MFI earnings. QoQ growth in MFI AUM of >8.8% indicates management’s comfort that asset quality concern is waning.
Outlook and valuations: On diversification drive; maintain ‘BUY’
We see growth levers: a) stabilising gold prices; b) gap in AUM/gram (INR1,821 versus incremental lending at INR1,900-2,000); and c) stabilising auctions to aid growth. However, following lower AUM base set in FY17 and uncertainty following new rule of cash disbursements being restricted to INR20k, along with higher opex, we prune our FY18/FY19 earnings estimates by 6%/10%. Further push will come from scale up of other businesses, which will drive re-rating. The stock is trading at 1.7x FY19E P/BV (consolidated). We maintain ‘BUY/SO’ with TP of INR120.
However, given its credentials as a powerhouse, it is only a question of time before the stock resumes its upward trajectory and brings cheer to investors.
Edelweiss has foreseen a target price of Rs. 120 on the following rationale:
“We see growth levers: a) stabilising gold prices; b) gap in AUM/gram (INR1,821 versus incremental lending at INR1,900-2,000); and c) stabilising auctions to aid growth. However, following lower AUM base set in FY17 and uncertainty following new rule of cash disbursements being restricted to INR20k, along with higher opex, we prune our FY18/FY19 earnings estimates by 6%/10%. Further push will come from scale up of other businesses, which will drive re-rating. The stock is trading at 1.7x FY19E P/BV (consolidated). We maintain ‘BUY/SO’ with TP of INR120.”
Sridhar Sivaram of Enam Holdings has also given a clean chit to all gold loan companies on the basis that they are secured lending with 4.5 percent return on assets (RoA) and 23 percent return on equity (RoE).
AK Prabhakar of IDBI Capital has opined that the market is not giving the right valuation to the business. He emphasized that Manappuram Finance is one of the two gold finance companies with a panIndia presence and is trading at 2.5 times book value, which is attractive. He opined that the stock can give 20-25% return in one year.
Manappuram Finance Research Report By Edelweiss
Higher auctions dent AUMs; NIMs sustained
Disbursements in Q4FY17 stood at INR123bn (up ~1.7% QoQ); however, higher auctions (INR7.9bn, bunched up in Q4FY17) led to >9% QoQ dip in gold AUMs. Meanwhile, underrecoveries were minuscule due to tilt towards shorter-duration loans. Sustained yields, along with better funding cost, bolstered revenue momentum. Management expects demonetisation impact to wane in FY18 and growth to normalise. Notably, other businesses—MFI book touched INR18bn and home loans & CVs at >INR3bn each—are making good progress. MGFL aims to take proportion of new business to 25% (~19% currently) by FY18 and 50% by FY20 with overall loan CAGR target of 20%.
Asset quality: Gold loans recovering gradually, MFI under pressure
With aggressive auctions during the quarter, GNPLs in gold business dipped to 2.0% (2.3% in Q3FY17), indicating softer recovery trend. Meanwhile, GNPLs in MFI business spiked to 4.7% (0.16% in Q3FY17) with stress largely flowing from Karnataka (MGFL has limited exposure to other stressed states of UP & Maharashtra), which along with aggressive provisioning policy, took a toll on MFI earnings. QoQ growth in MFI AUM of >8.8% indicates management’s comfort that asset quality concern is waning.
Outlook and valuations: On diversification drive; maintain ‘BUY’
We see growth levers: a) stabilising gold prices; b) gap in AUM/gram (INR1,821 versus incremental lending at INR1,900-2,000); and c) stabilising auctions to aid growth. However, following lower AUM base set in FY17 and uncertainty following new rule of cash disbursements being restricted to INR20k, along with higher opex, we prune our FY18/FY19 earnings estimates by 6%/10%. Further push will come from scale up of other businesses, which will drive re-rating. The stock is trading at 1.7x FY19E P/BV (consolidated). We maintain ‘BUY/SO’ with TP of INR120.
No comments:
Post a Comment