Manappuram Finance jumps 7% in a weak market on strong Q4 result

Shares of Manappuram Finance jumped 7.2 per cent to Rs 132, in an otherwise weak market, on the BSE on Friday after the gold financier reported a strong operating performance in the March quarter of FY20 (Q4FY20). The firm logged a growth of 30.4 per cent in profit before tax at Rs 534.07 crore during the quarter ended March 31, 2020, as compared to Rs 409.41 crore during same period of last year.

The company's total income grew 38.7 per cent to Rs 1618.15 crore during the quarter as against Rs 1166.51 crore during same quarter a year ago.

For the whole FY20, profit before tax grew by 37.8 per cent to Rs 2007.30 crore, as compared to Rs 1456.59 crore during FY19, total income for the fiscal year grew 30.8 per cent to Rs 5551.19 crore, as against Rs 4242.04 crore during the previous fiscal year.

Additionally, profit before tax from gold loan and others grew 44.5 per cent to Rs 459.47 crore during the quarter, as compared to Rs 317.97 crore during same quarter a year ago. However, profit before tax from microfinance business declined by 18.4 per cent to Rs 74.59 crore as against Rs 91.44 crore a year ago.

"At Rs 170 billion, MGFL’s gold loan AUM increased 31 per cent YoY in Q4FY20, continuing its growth streak for the ninth consecutive quarter. This was largely aided by 7 per cent YoY volume growth to nearly 73tonnes and 25 per cent YoY growth in AUM per branch to Rs 47mn. MGFL prudently maintained 59 per cent LTV on its gold portfolio," noted analysts at BOB Capital in  their results review note. They have raised FY21-FY22 earnings estimates by 4-6 per cent but cut their Mar’21 target price to Rs 150 (vs. Rs 225) on the back of incremental asset quality pressure in MFI and vehicle financing businesses.

The company has proposed a opt-in moratorium of three months on the payment of all principal installments and interst as applicable, falling due between March 1, 2020 and May 31, 2020, to all eligible borrowers classicfied as standard, even if overdue as on February 29,2020, excluding the collections already made in the month of March, 2020.

While GNPA ratio in the standalone entity (gold loans) increased to 0.9 per cent from 0.5 per cent; GNPA in Micro finance subsidiary also increased marginally to 1.56 per cent from 1.34 per cent in Q3. The company has made additional provisioning of Rs 150 million in standalone entity and Rs 550 million in Microfinance subsidiary, over and above the RBI requirement.

"MGFL’s core gold loan business saw continued traction aided by higher gold price. Even during lockdown period the company was able to disburse at 70% of the usual run rate from its online platform. Steep rise in gold prices in last 12 months has also aided growth and will continue to drive the balance sheet growth for few quarters as LTV remain at just 61% vs average of 68% in last few years. At CMP the stock trades at 1.2x FY22BV with RoA of 5.7% and RoE of 22.5% for FY22, which is one of the best across NBFCs," wrote analysts at Phillip Capital. They maintain 'BUY' rating with an unchanged price target of Rs 140. 

Despite giving a growth guidance of 8-10 per cent in gold AUM and flattish AUM growth for non-gold segment, the management said the extent to which the Covid-19 pandemic will impact the holding company and its two subsidiaries future results will depend on developments which are highly uncertain.

During the quarter under review, its gold‐loan AUM growth gold was 31 per cent, up 5 per cent sequentially, and was led by a sharp 29 per cent increase in gold price, 7 per cent increase in gold stock, even as LTV declined by 5.7 per cent YoY to 61 per cent. 

Besides, non‐gold AUM growth moderated to 27 per cent from 49 per cent in Q3, microfinance - constituting 67 per cent of non‐gold AUM - grew by 43 per cent.

At 10:10 am, the stock was ruling 4.8 per cent higher at Rs 129 apiece on the BSE, as compared to a 232 points, or 0.75 per cent, fall in the benchmark S&P BSE Sensex. A combined 16.64 million shares have changed hands on the counter on the BSE and NSE till the time of writing of this report.