Morgan Stanley Raises Price Target On Manappuram Finance — Check Bull, Base, And Bear Cases

Morgan Stanley’s latest risk-reward update on Manappuram Finance Ltd. is less about near-term earnings and more about valuation math. While the brokerage raised its price target to Rs 300, it retained an Equal-weight rating, highlighting a wide divergence between its bull, base and bear case outcomes.

The brokerage said the risk-reward profile has improved marginally, supported by strong gold prices and better near-term loan growth, but flagged continued uncertainty around strategy and earnings quality.

Similarly, Morgan Stanley had also hiked the target for Muthoot Finance on the back of robust gold loan metrics.

Morgan Stanley said persistent high gold prices and relatively lower regulatory pressure versus draft norms have created a supportive backdrop for Manappuram’s core gold loan business. However, it warned that earnings visibility remains clouded, especially in the non-gold segments.

The brokerage pointed to potential pressure on non-gold loan portfolios, where asset quality risks could rise if growth accelerates too quickly or credit costs overshoot expectations. It also noted that recent stock performance has already priced in much of the near-term optimism.

Morgan Stanley’s base case valuation of Rs 236 is the anchor for its framework. This scenario is pegged to 1.2x March 2028 standalone core book value, broadly aligned with Bain Capital’s open offer price of Rs 236 per share. Under this assumption, the brokerage expects steady but unspectacular execution — loan growth of about 15.5% CAGR over FY25–FY28, gradual improvement in asset quality, and credit costs moderating to 2.6% in FY26 before improving further.

The upside scenario is significantly more optimistic. Morgan Stanley’s bull case valuation of Rs 562 assumes a sharp improvement in strategy execution following Bain Capital’s acquisition, alongside persistently high gold prices. Morgan Stanley assigns a 20% probability to this outcome.

In this scenario, the brokerage applies a 2.8x March 2028 standalone book value multiple, closer to best-in-class gold financiers. Key to the bull case is a faster recovery in return ratios, aided by strong gold loan growth, better margins, and stabilising asset quality in non-gold segments.

On the downside, the bear case of Rs 190 reflects a far more cautious view. The brokerage assigns a 5% probability to this outcome, but flags it as a reminder of the risks tied to asset quality and capital allocation.

This scenario assumes continued pressure in the non-gold loan book, weaker credit outcomes, and limited improvement in returns. Morgan Stanley values this case at 1.0x March 2028 standalone book value, effectively discounting the sustainability of earnings.

Morgan Stanley’s call on Manappuram Finance is driven less by near-term numbers and more by where the valuation multiple eventually settles. Until clarity emerges on returns and non-gold asset quality, the brokerage expects the stock to remain range-bound.