Manappuram Finance surges 10%, nears 52-week high on strong Q2 results

The average trading volumes on the counter jumped over seven-fold with a combined 27.08 million equity shares having changed hands on the NSE and BSE till 10:25 AM

Shares of Manappuram Finance surged 10 per cent to Rs 154.65 on the BSE in Wednesday’s intra-day trade on heavy volumes.

The stock of the gold financier had hit a 52-week high of Rs 156.55 on September 4, 2023. At 10:25 AM; it was quoting 9 per cent higher at Rs 153, as compared to a 0.9 per cent rise in the S&P BSE Sensex.

The average trading volumes on the counter jumped over seven-fold today. A combined 27.08 million equity shares changed hands on the NSE and BSE till 10:25 AM.

The company reported a better-than-expected 37 per cent yearly rise in September quarter (Q2FY24) profit at Rs 560.7 crore, aided by strong demand for loans. Consolidated asset under management (AUM) jumped 27 per cent to Rs 39,000 crore.

Net interest income grew 25 per cent year-on-year (YoY) to Rs 1,350 crore and pre-provision operating profit (PPOP) rose 37 per cent YoY to Rs 870 crore.

Consolidated NIM expanded 15 bps QoQ to 15 per cent aided by expansion in yields and sequentially stable borrowing costs. Analysts expect gold loan yields to stabilize now.

To mitigate the cyclicality in the gold loan segment, Manappuram Finance has been actively diversifying into non-gold segments, with the share of non-gold products in the company's AUM mix at 47 per cent (vs. 37 per cent in 2QFY23).

Motilal Oswal Financial Services (MOFSL) believes Manappuram Finance should tread carefully in the non-gold segments as it is yet to exhibit any clear ‘right to win’ in these segments.

The management said it will not pursue loan growth at the cost of a compression in spreads, which the brokerage believes will continue to be a driver for higher profitability.

“Manappuram Finance trades at 0.8x Sep’25E P/BV and we believe that there is a scope for a re-rating in valuation multiples for a franchise that can deliver a sustainable RoE of 20 per cent. Risk reward for Manappuram Finance is favorable,” MOFSL said in a result update.