Broker’s call: Manappuram Finance (Buy)

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Target: ₹205

CMP: ₹164.10

At its analyst/investor meet, MGFL’s senior management team showcased the company’s capabilities in its non-gold business including MFI, vehicle finance, home finance and MSME & allied products.

Beyond its view/outlook on the gold business, MGFL presented a drill-down on each of its non-gold businesses, including a peek into its sourcing, underwriting and collection processes, how these businesses have successfully navigated Covid and have reverted to pre-Covid business indicators and readiness to now exhibit healthy AUM growth and profitability in non-gold businesses.

To mitigate the cyclicality in the gold loan segment, MGFL 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 YoY).

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The management has stated that it will not pursue loan growth at the cost of a compression in spreads, which we believe will continue to be a driver for higher profitability. MGFL trades at 1.0x 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 about 20 per cent.

Risk-reward for MGFL is favourable and we maintain our Buy rating with a revised target price of ₹205 (based on 1.2x Sep’25E consolidated BVPS)