Axis Securities Bullish On This Midcap NBFC Stock, Recommends Buy For 34% Gains

Brokerage firm Axis Securities has initiated a Buy on the stock of Manappuram Finance Ltd. (MFL) for a target price of Rs. 150/share. With the given target price, the stock is likely to give a strong return of 34% if purchased at the current market price. MFL is a leading financial sector company operating as a NBFC. It is a midcap company with a market capitalisation of Rs. 9,513.48 crore.

Financial Performance

According to Axis Securities, MFL reported steady growth in AUM of 17.2/11.2% YoY/QoQ, majorly driven by healthy growth in MFI (Up 40/15% YoY/QoQ), Vehicle (Up 49/16% YoY/QoQ) and other loans (Up 200/37% YoY/QoQ). However, gold loans remained under pressure as it declined by 2% YoY but reported sequential growth of 6% QoQ. Although net yields declined by 150 bps QoQ to 21% due to a change in gold loan tenure, aided by robust AUM growth, NII reported healthy growth of 25/3% YoY/QoQ. Opex grew by 21%/3% YoY/QoQ, majorly driven by the increase in staff expenses by 35/5% YoY. With robust growth in AUM, healthy growth in NII and lower-than-expected provisions, PAT reported a growth of 59% YoY.

Outlook

According to brokerage, "In housing finance, the focus is on low-ticketing housing loans. Management has decided to tender niche areas such as finance and healthcare professionals and small hospitals. In the vehicle finance business management is focused to increase penetration in rural and semi-urban locations. Capital infusion of about Rs 500 Cr from parent and subordinate debt of equal amount or either ipo or from private equity in the MFI business is expected in the near term. The collection is expected to improve in MFI going forward. Asset quality improvement is expected to continue with benign credit costs. "Thus with AUM growth momentum to continue, yields expected to expand in gold loans, NII growth to remain healthy, benign credit cost, and adequate liquidity, we believe, MFL has its key growth lever intact to deliver sustainable ROA/ROE of +4.4/18%," the brokerage has said.

Valuation & Recommendation

Axis Securities said, "We maintain our BUY rating on the stock with the revised target price of Rs 150/share (1.1x SEP 24E ABV), implying an upside of 36% from the CMP."

Stock Outlook

The stock of MFL closed 2.04% higher at Rs. 112.40/share on NSE. The stock recorded its new 52 week high at Rs. 133.95/share on 19 April 2023 and 52 week low at Rs. 81.50/share on 20 June 2022. It has fallen 2.94% in 1 week and 11.6% in 1 month, respectively. It has given 11.23% positive return in 1 year. In 3 years it has fallen 11.67% and 2.64% in 5 years, respectively.

Disclaimer - The stock has been picked from the brokerage report of Axis Securities. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.