This NBFC stock is expected to rise 27% from current levels; take a look
Stock market news, stock market today: The companys stock surged as much as 6.16 per cent to Rs 160.90 on the BSE, a day after the company held its Analyst Meet.
Stock market news, stock market today, Manappuram Finance share price: Manappuram Finance, the Kerala-based non-banking finance company (NBFC) and one of the leading gold loan companies, were on the investors' radar on Wednesday, November 29. The company's stock surged as much as 6.16 per cent to Rs 160.90 on the BSE, a day after the company held its Analyst Meet.
Analysts who attended the meeting are positive about the company's prospects and hence recommend their clients buy its shares.
Here are key reasons why brokerages are bullish on the stock after its Analyst Meet.
Gold loan growth: The management expects the overall gold loan portfolio to grow by 8–10 per cent on a year-on-year (YoY), basis, along with sustaining the gold loan yield at the current levels of nearly 22 per cent. Further, it expects the average ticket size (ATS) to remain within the current range of nearly Rs 50,000–Rs 60,000.
Stable growth across business verticals: The company is experiencing steady growth across all its business verticals, including vehicle finance, hence diversifying its revenue avenues while reducing its dependence on a gold loan portfolio (in line with its target of achieving a 50-50 balance between a gold and non-gold portfolio).
Outlook: Competition intensity impacted asset under management (AUM) growth as well as margins. However, H1FY24 reflected an improvement in margins, and the management opined that competitive intensity seemed to have peaked. "We believe that the company has the potential to report a return on assets (ROA) above 3.5 per cent," notes Bunty Chawla, a research analyst with IDBI Capital.
The brokerage has given a 'Buy' rating on the stock with a target price of Rs 205.
Sharing similar views, analysts at Nirmal Bang Securities said they remain positive about the company’s growth prospects as a diversified lender. Further, the changes at the macro level post the recent geopolitical tensions leading to the firming up of gold prices should provide some benefit on the growth front when it comes to MGFL’s core Gold Loan business.
"With double-digit growth expected to return in the core business, yields stabilising at 21–22 per cent (>90 per cent gold loan yields being in excess of 12 per cent), strong growth in higher-yielding non-gold businesses, lower opex (led by improved productivity levels) and control on asset quality, we expect RoA to be at 4.7 per cent over FY23-FY25E vs 4.1 per cent in FY23," the brokerage said in its November 29 report.
It has maintained a buy call on the stock with a target price of Rs 177.
Other key highlights from the Analyst Meet
Impact of RBI guidelines on increasing RWA on lending by banks to rated NBFCs: The management highlighted that there would be an expected impact of the increase in RWA on lending by banks to rated NBFCs on the overall CoF for MGFL to the extent of ~15-20bps, both on existing as well as incremental borrowings. However, it does not expect any challenges in terms of raising funds and continues to have an undrawn line of sanctions.
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