On Wednesday, Manappuram Finance Ltd (MGFL:IN) received a new Buy stock rating from Jefferies, with a price target set at INR270.00. The firm sees the company's diverse asset management, with gold accounting for 49% of assets under management (AUM), as a growth opportunity beyond the influence of gold prices.
The expectation is for gold loans to expand by 16% in the fiscal year 2025, following a 9% increase in FY24. This is anticipated to contribute to an 18% compound annual growth rate (CAGR) in consolidated loans and a 17% earnings per share (EPS) CAGR from FY24 through FY27.
The analysis acknowledges some concerns, particularly the high stress in the microfinance institution (MFI) portfolio, which represents 26% of AUM, and the execution risks in the non-gold business segments. Still, these issues appear to be reflected in the current valuation, with the stock trading at 1.4 times its FY25 estimated book value (BV), close to its five-year average of 1.3 times despite an expected 18% or higher return on equity (ROE).
Jefferies suggests that improvements in gold loan growth and consistent performance in non-gold sectors could potentially increase the company's multiples. The price target of INR270 is based on 1.3 times the estimated book value for June 2026. The initiation of coverage with a Buy rating and a price target of INR270 indicates a positive outlook for Manappuram Finance's future performance.
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