Manappuram Finance climbs 11%, nears its 52-week high after brokerages upgrade stock post-Q2

Stocks in focus: The company’s gold asset under management has also climbed 8 per cent YoY. Also, the contribution of gold AUM to the overall asset base has increased to 47 per cent.

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Stock market today, share market today: Shares of the NBFC major galloped near its 52-week high price of Rs 156.55 as major brokerages upgraded the stock after the company reported better-than-estimated Q2 numbers.

The stock at the day's high scaled to Rs 154.65 apiece on the BSE as against the earlier close of Rs 140.6, implying a run-up of 11 per cent.

As against Zee Business Research's estimates of Rs 400 crore, the company for the September quarter posted a profit of Rs 420 crore versus Rs 349 crore in the same quarter last year. Net interest income (NII) has increased to Rs 962 crore from Rs 872 crore in the same quarter of the previous fiscal. NII was estimated at Rs 975 crore.

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Credit costs have been steady at 1.3 per cent.

The company’s gold loan book has also climbed 8 per cent YoY. Also, the contribution of gold AUM to the overall asset base has increased to 47 per cent. Furthermore, the NIM, or net interest margin, is also retained at 12.6 per cent.

The management of the company is optimistic and expects the gold loan portfolio of the NBFC to witness 10 per cent growth in FY24. Moreover, it hinted that, despite aggressive competition, the company would work to maintain its margin.

Here’s what brokerages advice

Morgan Stanley is overweight on the counter and has raised its target to Rs 200 from the earlier Rs 183. PAT at the company came in better than the brokerage’s estimate by 10 per cent. Higher assignment and insurance broking fees drove the beat. Gold loan yields at the company's expanded and consolidated NIM topped the brokerage’s estimates. The brokerage sees upside risks to earnings and more to valuation multiples.

BoFA Securities has retained its ‘buy’ rating on the counter with a target price of Rs 182. The brokerage said that the Kerala-based financial company posted earnings surprises on the back of strong fee income and lower operational expenses. For the brokerage, the company’s stocks trading at FY25E P/B of 0.94x (vs. 1.4x 5yr avg) are undervalued given the strong non-gold business growth and improving MFI yields.

CLSA is also bullish on the stock and has maintained its buy call with a target price of Rs 185 per share.

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