This Gold Loan Stock Can Jump 31%, "Buy" Says Leading Brokerage

Brokerage firm Prabhudas Lilladher has recommended the investors to buy the stock of non-banking finance company (NBFC) Manappuram Finance Ltd. It believes that the scrip shows a strong growth potential of nearly 30.91%.

When Manappuram Finance was established in 1949, it was involved in pawn broking and money lending, and carried out on a modest scale. Now, the company has converted into an NBFC which has grown manifold. It now deals in gold loans and other microfinancing schemes, commercial vehicles, home and MSME/personal loans.

Q4FY23 performance

Manappuram Finance has reported 6% QoQ growth in gold loan assets under management (AUM) after softness for four consecutive quarters, which was a positive. The yields on gold loans have corrected to 21% against 22.4% in Q3FY23 due to an increase in the tenor of loans to 6 months from 3 months, as per the brokerage firm. Gold holdings remained stable at 60 tonnes.

Prabhudas Lilladher noted that there was healthy growth in non-gold segments (18.4% QoQ/55.6% YoY) as well. The company's other segments performed very well, MFI AUMs grew 15.3% on a QoQ basis, VF AUMs grew 16.2%, and HLs grew by 9.1%QoQ and other loans including MSME continued strong momentum with 26.7% QoQ growth. The profit after tax increased by 5.5% for QoQ and 59.1% YoY due to strong growth in AUM and net interest income.

Valuation and rating

According to Prabhudas Lilladher, "We believe that the company is on the right track, as growth in gold loan AUM returned plus management is confident of achieving 10% growth in FY24. We expect earnings to grow at 16% CAGR over FY23-FY25 and standalone gross non-performing assets (GNPAs) to trend towards 1%."

The brokerage firm further adds, "We maintain our 'BUY' rating at a price target of Rs 144 per share (unchanged) on 1.1x Sep FY24E P/ABV. Re-rating can happen once gold loan AUM growth guidance is achieved in FY24 along with stable margins."

Dividend details

Additionally, the directors of Manappuram Finance, in the board meeting held on May 12, have declared an interim dividend of Rs 0.75 (Seventy-Five Paise Only) per equity share of face value of Rs 2.

The NBFC has set May 24, 2023, as the record date to ascertain the entitlement of interim dividends among the shareholders, and dividend /dividend warrants shall be paid or dispatched on or before June 10, 2023.

Share price movement of Manappuram Finance Limited

The latest closing price of Manappuram Finance Ltd stock is Rs 110.20 per share, which is marginally up by 0.23% over the previous day's closing price. In the last one year, the share price has rallied by 9.05%, but in the last three years, the price has fallen steeply by 13.36%.

Disclaimer

The stock has been picked from the brokerage report of Prabhudas Lilladher. 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.