Jefferies Group is a leading provider of comprehensive investment banking and capital markets services. The firm offers a wide range of services, including capital markets facilitation, financial advisory, institutional brokerage, securities research, and asset management, to meet the diverse needs of its clients.
According to Jefferies, gold non-banking financial companies (NBFCs) are likely to benefit from rising gold prices, reduced competition, and increased diversification.
Considering these factors, Jefferies believes that Muthoot and Manappuram Finance will experience low asset quality risk and superior returns on equity (ROE) compared to most other NBFCs. Within this context, the current valuations for these companies are deemed reasonable.
The brokerage firm anticipates that Muthoot and Manappuram Finance will experience stronger loan growth than in the past three years, with an expected earnings per share (EPS) compound annual growth rate (CAGR) of 17-19% for FY24-27, compared to 3-8% for FY21-24.
Additionally, Brokerage projects Muthoot and Manappuram Finance to achieve an ROE of over 18% for FY24-27, according to a report by Moneycontrol.
Jefferies mentioned that the risk to asset quality in gold is low while returns are high, and the company’s earnings have been steadily improving. Consequently, their RoEs will be superior to most other NBFCs, making the player’s valuations appear reasonable in this context.
Muthoot Finance Ltd
Muthoot Finance Ltd shares gained 2.8% on thursday’s trade to ₹1,885.95 per share. The company has a market capitalization of ₹74,774 crores.
Muthoot Finance is NBFC engaged in the business of providing gold loans. The company predominately operates in Southern India. Muthoot Finance Ltd shares gained 35% in the last six months and 44% in the last 12 months.
The company’s revenue increased by 20 percent year on year, from ₹10,515 crore in FY22-23 to ₹12,635 crore in FY23-24. During the same time, net profit has increased by 16.5 percent, from ₹3,474 crore to ₹4,050 crore.
Foreign brokerage, Jefferies has initiated a ‘buy’ rating on Muthoot Finance Ltd. with a target price of ₹2,200 per share, representing an upside potential of up to 18% from thursday’s price.
Jefferies prefers Muthoot Finance which has 82% of its assets under management in gold, due to its greater leverage on gold prices.
Manappuram Finance Ltd
Manappuram Finance Ltd shares gained 3.2% on thursday’s trade to ₹227.85 per share. The company has a market capitalization of ₹19,197 crores.
Manappuram Finance is a Non-Banking Finance Company (NBFC), which provides a wide range of fund-based and fee-based services including gold loans, money exchange facilities, etc. The Company is a Systemically Important Non-Deposit taking NBFC.
Jefferies has initiated a ‘buy’ rating on Manappuram Finance Ltd with a target price of ₹270 per share, representing an upside potential of up to 20% from thursday’s price.
The company’s revenue increased by 32 percent year on year, from ₹6,684 crore in FY22-23 to ₹8,848 crore in FY23-24. During the same time, net profit has increased by 46 percent, from ₹1,500 crore to ₹2,197 crore.
Written by Omkar Chitnis
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