🥇 First rule of investing? Know when to save! Up to 55% off Investing Pro before BLACK FRIDAYCLAIM SALE

Morgan Stanley Becomes OW on Manappuram Finance, InvestingPro+ Shows Steep Upside

Published 12-10-2024, 11:30 am
© Reuters.

Gold financiers have been closely tied to the fluctuations in gold prices, and recent trends point to some moderation in the near term. According to Morgan Stanley (NYSE:MS), gold prices in India remained flat in the second quarter of FY25, with a negligible 0.1% drop after a strong 13%+ growth in the first quarter. This leveling off in prices is expected to impact the gold AUM (assets under management) growth of both Manappuram Finance (NS:MNFL) and Muthoot Finance (NS:MUTT), though in varying degrees.

Manappuram Finance, rated as "Overweight" by Morgan Stanley, has focused more on protecting its yields, maintaining a rate of 22-22.5%, rather than aggressively growing its gold loan portfolio. As a result, Manappuram's gold AUM growth is projected at +2% quarter-on-quarter (QoQ), down from 10% in the first quarter. Meanwhile, Muthoot Finance, rated "Underweight," is expected to see +3% QoQ gold AUM growth, down from +11% in the prior quarter.

In terms of overall AUM growth, Muthoot is likely to outperform Manappuram with a 26.5% year-on-year (YoY) increase, compared to Manappuram's 19.5%. The latter’s non-gold loan book, however, continues to expand at a robust pace, driven by a 23.5% YoY rise, despite a slowdown in its microfinance segment.

When it comes to profits, Manappuram’s growth may be more subdued, with expected gains of just +1.6% QoQ and +1% YoY. This is due to factors like net interest margin (NIM) compression and elevated credit costs in its microfinance subsidiary. In contrast, Muthoot is projected to deliver stronger profit growth of +16% QoQ and +26% YoY, helped by lower credit costs.

Looking forward, investors are keenly watching for two key factors: the possible retracing of gold loan growth benefits for Muthoot, following the removal of RBI restrictions on IIFL Finance (NS:IIFL), and the outlook for Manappuram’s microfinance asset quality.

Manappuram remains attractively valued, with a 43% upside potential according to Morgan Stanley's target price of INR 262. However, it's always wise to consider a broader range of analyst predictions, which vary between INR 150 and INR 270 and can be seen on InvestingPro+. Also, the fair value of the counter after analyzing via 4 different financial models is also quite high, which can be seen on InvestingPro+

For those looking to gain a competitive edge and deep insights, InvestingPro+ provides comprehensive insights, fair value estimates, and analyst forecasts, ensuring investors stay ahead of the curve.

Read More: Rising Inflation: Base Effects Fade, But Relief Could Be on the Horizon

X (formerly, Twitter) - Aayush Khanna

LinkedIn - Aayush Khanna

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.