Manappuram Finance Q2 Results Review - Healthy Operating Performance; Outlook Positive: Systematix

Systematix Research Report

Manappuram Finance Ltd.’s reported healthy performance with 37% YoY growth in profit after tax (7% beat; led by higher third party insurance commission and slightly lower tax rate).

Net interest income growth was strong at 26% YoY (on expected lines) led by 27% YoY (5% QoQ) growth in consolidated assets under management and 5 basis points QoQ increase in NIMs to 14.2%. Net yield on the gold loan book increased by 50 bps QoQ to 22.1%.

The growth in the AUM was led by 58.1% YoY (10.2% QoQ) growth in non-gold portfolio, even as gold loan AUM grew by a sluggish 8.4% YoY (1% QoQ). As a result, non-gold AUM share in overall AUM increased further to 47% from 44% in Q1.

We have increased our earning estimates by 10%/ 5% for FY24/25 to factor in higher insurance commission and margins. We estimate a 18% compound annual growth rate in Manappuram Finance’s AUM to deliver a 29% CAGR in earnings over FY23- FY25E.

With optimal product mix along with improving NIMs, Manappuram Finance should be able to improve their return on asset/return on equity to 4.9%/20.0% by FY25E from 4.1%/16.6% in FY23, respectively.

Maintain our 'Buy' rating on the stock with a revised price target of Rs 180 (Rs 165 earlier).

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