SKS Microfinance, Manappuram Finance hit 52-week high

Thus far in 2016, Manappuram Finance (up 38%) and SKS Microfinance (up 20%) have outperformed the market as compared to 0.36% decline in Sensex.

Shares of SKS Microfinance (Rs 607) and Manappuram Finance (Rs 41) have touched their respective 52-week highs on BSE in intra-day trade on expectation of strong quarterly performance for the quarter ended March 2016 (Q4).

Thus far in 2016, Manappuram Finance (up 38%) and SKS Microfinance (up 20%) has outperformed the market by gaining more than 20% each as compared to 0.36% decline in the benchmark S&P BSE Sensex.

“SKS Microfinance is likely to report strong 66% assets under management (AUM) growth and 126% profit growth on continuous strong credit demand from the target segment, coupled with increase in ticket sizes, which is helping growth further,” Motilal Oswal Securities said in a Q4 results preview.

Reduction in lending rates on the back of declining cost of funds, consistent spreads and increase in one-year loan size by the Reserve Bank of India should boost demand for microcredit, added report.

“SKS Microfinance’s AUM growth is likely to be robust at 80%+ year on year (yoy). Net interest income (NII) and earnings are expected to grow by 66% yoy and 119%yoy respectively. Asset quality expected to be stable,” according to Emkay Research.

Manappuram Finance had reported strong NII growth for the quarter ended December 2015, backed by robust AUM growth, lower cost of funds and low auctions.

According to IIFL, the benefits of the shorter term gold loan portfolio are clearly visible in the increase in yields, thus factor higher yield on AUM through FY16?18.

“Upward revision in yields as well as gold loan AUM growth (now assuming higher average gold prices) has led to material upgrade in earnings estimates notwithstanding elevated growth in opex due to aggressive distribution franchise expansion and employee addition,” the brokerage house said in Q3 results update.

The board of directors of SKS Microfinance will meet on May 04, and Manappuram Finance on May 12, to consider the audited financial results for the quarter/year ended March 31, 2016.