The shares of Manappuram Finance Ltd tanked 11.24% yesterday and they continued to fall on Friday’s early deals. They reached their 52-week low of ₹91.85 on the bourses yesterday after the company reported weak numbers for the March quarter. Its shares are currently trading at ₹ 93.20 apiece.
It reported more than a 44% slump in its consolidated net profit at ₹ 261 crores in March, versus a net profit of ₹ 468 crores in the same quarter of the previous year. The NBFC’s revenue declined after its flagship gold business income fell 17.6% to ₹ 1109.18 in Q4FY22 as compared to ₹ 1346.48 crores in Q4FY21.
On the bright side, revenues from the Microfinance segment grew 34.6% to ₹382.13 crores in the March quarter of 2022 as compared to the same period last year.
“Our PAT (Profit After Tax) has been affected temporarily due to shifting of high yield to lower-yielding gold loans. We have reduced Opex (operating expenses) during this quarter and we intend to maintain it at this level,” the company said in an investor presentation.
“We are focusing more on collection efficiency and quality growth in MFI books and building up a gold loan portfolio,” it added.
Experts said that the company’s sales, as well as net profit, have been falling for the last five quarters. Further, its net interest income also fell by 10.2% in the March quarter of FY22 to ₹ 986.50 crores as against ₹ 1098.40 crores in the year-ago period.
The AUM of the gold loan financier grew by 11.2% from a year ago to ₹30,300 crores, while it fell marginally by 0.5% from the preceding quarter.
“Over the last fiscal year, we have restored the growth momentum in our microfinance, vehicle finance, and home loans businesses despite the disruptions from the third wave.
At the same time, our core business of gold loans faced certain peculiar challenges arising from the intense price competition among the NBFCs which prevailed for much of the year thereby impacting our margins. However, we see this as a temporary phase, as unhealthy competition will benefit no one,” V P Nandakumar, MD & CEO of Manappuram Finance, said.
Here’s what brokerages say:
Motilal Oswal
The brokerage highlighted that the demand for gold loans is muted, especially in the low-ticket size segments and that the Gold loan NBFC business is never again going to be a ~16% NIM business model. They have maintained a buy rating with a target price of ₹130 per share. This implies an upside of 39.49%.
Axis Direct
Analysts at Axis Direct said that Mannapuram’s Q4FY22 earnings performance was below there and the street’s expectations. The brokerage has maintained a buy rating with a revised target price of 165.00 per share. This translates to an upside of 77.03%.
ICICI Securities
The brokerage said that the yield in the gold loan business continued to decline along with core gold and MFI businesses’ AUMs. They maintained a buy on sustainable RoE outlook remaining more than 15% vs current P/B multiple of 1.1/0.8 based on FY22/FY24E book value even after factoring modest growth and yields.
The brokerage has maintained a buy rating on the shares with a target price of ₹ 105. This indicates an upside of 12.66% as compared to the current market price of the share.
