Nirmal Bang Institutional Equities on Friday said Manappuram Finance’s (MGFL) Q4FY25 results missed estimates across key metrics, and the brokerage flagged three reasons why the stock may face an overhang in the near term. They include asset quality stress and AUM decline in Asirvad Microfinance, growth constraints arising from RBI’s restrictions on new branch openings, and margin pressure as yields on the core gold loan business trend lower. It reiterated a HOLD rating and a target of Rs 290 on the stock that is up 76 per cent in 2025 so far. CLSA also downgraded the stock to ‘Hold’ and suggested a target of Rs 290.
Nirmal Bang noted that net interest income, pre-provision operating profit, and profit after tax fell short of expectations by 7.3 per cent, 16 per cent, and 26.3 per cent, respectively. Net profit declined 20.9 per cent year-on-year (4.1 per cent sequentially), weighed down by margin compression, negative other income, higher operating costs, and elevated provisions.
Standalone assets under management (AUM) grew 18.7 per cent year-on-year (6 per cent quarter-on-quarter) to Rs 37,820 crore, led by a 30.1 per cent rise in gold loans, even as commercial vehicle loans fell 16.3 per cent. Calculated net interest margin contracted 175 basis points year-on-year to 12.4 per cent. Asset quality remained steady with gross non-performing assets at 3 per cent. Among subsidiaries, Asirvad Microfinance reported a Rs 1.7 billion loss.
Nirmal Bang expects Manappuram Finance’s earnings to grow at a 9.9 per cent compound annual growth rate (CAGR) over FY25–FY28E, translating into return on assets and return on equity of 3.9 per cent and 11.8 per cent, respectively, in FY28E. The gold loan portfolio is expected to expand at a 17.9 per cent CAGR, driven by gold price appreciation (14.1 per cent), modest tonnage growth (2.2 per cent), and limited client additions (2 per cent).
Nirmal Bang values the standalone gold loan business at 1.6 times September-27E adjusted book value, assigning a standalone value of Rs 274.8 per share. Including subsidiaries (Rs 15.7 per share after a 15 per cent holding company discount), it arrives at a revised target price of Rs 290 (earlier Rs 300).
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