Motilal Oswal Assigned "Buy" On Midcap NBFC Stock, Claims 25% Potential Upside, Rallied 2.57%

Motilal Oswal has recommended "buy" on Manappuram Finance Ltd., a midcap Non-Banking Finance Company (NBFC) stock. The brokerage has estimated a target price of Rs 150 apiece, claiming 26% potential upside from its current level. Manappuram Finance provides a wide range of fund based and fee based services including gold loans, money exchange facilities, etc. It has a market capitalisation of Rs 10,118.65 crore.

Manappuram Finance's Current Market Price, Return, 52 Week Low/High

The stock today last traded at Rs 119.55 apiece, up 2.57% from the previous close of Rs 116.55 apiece. The stock recorded its 52 week low on 20 June 2022 at Rs 81.50 apiece, and 52 week high on 7 April 2022 at Rs 126.15 apiece, respectively.

The stock gave 8.63% in 1 week, and 14.51% in 1 month, respectively. It gained 2.49% in 1 year. It has given 22.55% in 3 years and 16.12% in 5 years, respectively.

Non-gold businesses on strong growth trajectory, Buy for a target price of Rs 150/share

According to the brokerage firm, MGFL's non-gold businesses are headed by its home-grown leadership team with excellent stability. "MGFL trades at 0.9x FY24E P/BV and we believe that there is still scope for a re-rating in valuation multiples for a franchise that can deliver RoE of 17%-18%. While we expect MGFL to deliver gold loan growth of ~7%/8% in FY24/FY25, we estimate consolidated AUM growth of ~19% and consolidated RoA/RoE of ~4.0%/18% in FY24. Maintain BUY with a TP of INR150 (premised on 1.0x FY25E P/BV)," the brokerage has said.

Key downside risks

1) Significant market share loss in the gold lending business

2) while non-gold products provide product mix diversification and reduce the deep cyclicality inherent in gold lending, it should be done with caution since MGFL has not demonstrated any clear 'right to win' in non-gold products in the past.

Disclaimer
The stock has been picked from the brokerage report of Motilal Oswal. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.