Two-Fold Profit Jump Sends Manappuram Finance Shares Rallying
Two-fold jump in Q3 net profit restores analysts’ confidence in Manappuram Finance
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Manappuram Finance Ltd. rallied as much as 12.7 percent and brokerages upgraded their view on the stock after the non-banking finance company reported a two-fold jump in its profit in the October to December quarter.
Profit soared to Rs 203.7 crore, while the net interest income jumped 52.6 percent year-on-year to Rs 583.1 crore, according to the company’s filing to the exchanges. The performance was led by a 37.6 percent increase in the consolidated assets under management (AUM).
The AUM remained stable even on a sequential basis, rising 0.4 percent to Rs 14,545 crore, as against expectations of material reduction due to the government's November 8 demonetisation decision and the fall in gold prices.
On the flip side, gross non-performing loans (NPL) in the gold loan business spiked to 2.3 percent from 0.9 percent in the July to September quarter.
As auctioning is being accelerated, NPL level is expected to fall significantly for the year end. Realisation from collateral liquidation would be better now as gold prices have recovered and operations in auction market is restored. There remains scope for some of the provisions done in Q3FY17 being reversed in the current quarter.Rajiv Mehta, Analyst, IIFL Wealth (Source: Note To Clients)
About 98 and 92 percent of installments due in November and December respectively have been collected and the management expects the collection rate to normalise in the next few months fully, added Mehta.
Mehta has upgraded Manappuram’s earnings estimates for the next financial year, and has projected 5 percent return on assets and 22-24 percent return on equity on account of the “resilient growth and profitability performance”. IIFL Wealth has a ‘buy’ rating on the stock with a 12-month price target of Rs 125.
Other Analyst Calls
Other brokerage firms have also maintained a positive view on Manappuram Finance.
- Daiwa Securities upgraded the stock to ‘Buy’ from ‘Outperform’, and hiked the price target to Rs 130 per share from Rs 115.
- Antique Stock Broking hiked the price target by 16.7 percent to Rs 133 while retaining a ‘ buy’ rating.
- Phillip Securities hiked the price target marginally to Rs 135 with an unchanged ‘Buy’ rating.
The Manappuram Finance stock traded 7.3 percent higher at Rs 99.80 as of 1:20 p.m.