Stock In Action - Manappuram Finance

Highlights

1- Manappuram Finance's financial performance has shown growth over the past year.
2- Manappuram Finance share price analysis indicates a bullish trend in the market.
3- Manappuram Finance's quarterly earnings report highlighted continuous profit growth.
4- Manappuram Finance's gains recently from ₹156 to ₹213 in June month.
5- For Manappuram Finance's stock, analyst forecasts positive trends for the future.
6- Manappuram Finance is currently trading at ₹213, showing a 8% increase as of 11:54 am on NSE.
7- Manappuram share is rising because of spike in gold price, Manappuram Finance share is up 25% YTD.
8- Manappuram Finance's stock performance has been impressive, gaining 68.10% over the past year.
9- A comparison of Nifty gains reveals that Manappuram Finance's growth of 68.10% outperformed NIFTY's 27% gain over the past year.
10- CLSA has retained its buy rating on Manappuram Finance, setting a target price of ₹240.

Manappuram Finance Share is in Buzz?

V.P. Nandakumar, MD and CEO of Manappuram Finance, says that expected interest rate cuts and geopolitical tensions will boost gold rates, while the shift to organized businesses will keep the demand for gold loans strong. High gold prices are good for the gold loan business because customers can get loans by pledging smaller amounts of gold. He highlights that gold is always in demand in India, and gold loans are a popular choice for quick funds. The unorganized sector still holds 60-65% of the market, giving organized players plenty of room for growth.

We aim to grow Manappuram Finance Ltd's assets under management (AUM) by 20%. The IPO funds will help our microfinance subsidiary, Asirvad, keep expanding. We're looking to enter new areas and carefully evaluate their potential.

Our commercial vehicle and home finance portfolios have great potential, thanks to government support for infrastructure and affordable housing. We're aiming for 10% growth in our gold loan book considering demand and competition. Our new non gold businesses also have great potential as the economy continues to grow.

Why Should I Invest in Manappuram Finance Shares?

Investing in Manappuram Finance shares requires a thorough understanding of its financial health, market position & risks. Here's a detailed analysis to help you make decision.

Manappuram Finance's Financial Performance

Manappuram Finance's net profit over the years has shown fluctuations and growth. In March 2021net profit was ₹1,725 crores which decreased to ₹1,329 crores in March 2022. However, by March 2023, net profit had risen to ₹1,500 crores and by March 2024, it reached ₹2,197 crores. Correspondingly, earnings per share (EPS) in rupees were ₹20.37 in March 2021, ₹15.70 in March 2022, ₹17.67 in March 2023, and ₹25.86 in March 2024.

Analyst Recommendations

Motilal Oswal says, we think there's potential for the stock to be valued higher if the company can consistently achieve a Return on Equity (RoE) of around 19-20%. We recommend buying the stock because we believe the potential reward outweighs the risk, especially considering its current valuation is 0.9 times the projected book value for the fiscal year ending in 2026. Our target price is ₹225, based on a valuation of 1.2 times the estimated book value per share for the same fiscal year.

Attractive Valuation Metrics

Manappuram Finance has strong financial metrics including Earnings Per Share (EPS) of 19.59, reflecting its profitability. With a Return on Equity or ROE of 14.99% and Return on Capital Employed or ROCE at 11.85%, the company demonstrates effective utilization of shareholder and capital resources. Manappuram Finance operates with zero pledging, indicating a conservative financial approach. The company has consistently grown its profits year over year and maintains lowest P/E ratio among its peers, positioning it attractively in the market. Positive cash flow further highlights its financial health and ability to generate operational funds. With a Foreign Institutional Investor (FII) holding of 31.99%, Manappuram Finance enjoys strong investor confidence and support. These factors collectively highlight Manappuram Finance as a stable and promising entity in the financial services sector.

Technical Chart

Technical chart for Manappuram Finance shows a positive trend on the weekly timeframe. After reaching a low of around ₹85 in June 2022, stock has been in an uptrend currently trading at ₹213, which has doubled investor’s investments. Stock has recently reached its peak for 2022, and if it sustains above this price level investors could see further upside. This rally is supported by rising gold prices. If the current uptrend persists investors may target ₹230 and beyond in the near future. It's crucial for investors to monitor stock closely for further gains.

Conclusion

Investing in Manappuram Finance shares offers opportunities for both traders and long term investors. The company has shown positive market performance and has received a favorable outlook from brokerages. Its strong financial performance, highlighted by attractive ROE and ROCE along with being debt free makes it an appealing investment option.

However, before making investment decisions investors should carefully analyze Manappuram Finance's financial statements and track its technical performance. It's also important to monitor how the company performs compared to the benchmark index.