[T.S.R:18319] BOAML-BUY Manapuram With A Target Of Rs 80

 

BOAML

Manapuram-BUY With A Target of Rs 80

3Q: Earnings up 117% yoy driven by strong AUM growth

MGFL reported earnings of Rs1.6bn, a 117% yoy growth and +9% higher than est. driven by stronger than est. AUM growth of ~90% yoy (~15% qoq). Disbursements growth also strong at 86% yoy (Rs104bn) in 3Q, partly aided by higher gold prices. Average LTV (AUM) at ~69%. Moreover, spreads were stable qoq at <14%. Cost-inc. ratio more or less stable yoy at ~43%, despite +45% employee base yoy and +50% branches (2738 now) yoy. Asset quality is comfortable, with gross largely stable at ~45bps and net at ~19bps.

 

Other variables too showing traction, key for future growth

 

The average loan outstanding per branch increased 24% yoy (6% qoq) to Rs45mn in 3Q. MGFL added 0.14mn customers in 3Q12 (total customer base now at 1.6mn). The company opened 235 branches in 3Q12 (943 branches in the last 12 months), taking its total branches to 2,738.

 

Buy for growth, high RoAs and rising RoEs

 

We have raised earnings by +9/4% for FY12/13 post the 3Q surprise. We estimate net profit growth at +94/28% over FY12/13 driven by AUM growth (+45% CAGR over FY11-13) and operating leverage (+35% of branches added in last 1 year). Hence, RoAs to remain high (+4.5%) and RoEs to improve (~22% in FY11 to +26% in FY13), as an improvement in operational efficiency would largely mitigate adverse impact of margin compression ahead (est. ~100bps compression

over FY11-13).

 

Our FY12/13 est. factors in 1.0% gross NPLs / credit costs at +50-

60bps (<20bps now). Hence, we believe stock trading at ~2.2x FY12E book may likely trade at similar multiples one-year out (FY13), implying a PO of Rs80.

 

 

Safe Harbor Statement:

Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.

 

Nothing in this article is, or should be construed as, investment advice.

 

 

 

 

 

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