Manappuram General Finance and Leasing
Reco: BUY
CMP: Rs. 699
Target Price: Rs. 900
Midas Touch
Manappuram General Leasing and Finance (MAGFIL) is India's one of the few listed micro finance company with enviable presence in the loan against gold segment. Large population without access to banks, high gold prices and doubling of branch network (to 1500 over FY09-12E) will help MAGFIL's AUM grow by 8x over FY09-12E. We expect MAGFIL's net profit to grow by 12x (to Rs3.5bn) over FY09-12E, driven by strong AUMs growth and strong pricing power with NIMs of 16%+.
With robust risk management systems in place (3-stage appraisals, strong vaults and limiting the loan sizes to 15-20k), we expect MAGFIL to achieve this growth without compromising on the asset quality. We expect MAGFIL's net NPAs to move down from 1.4% to 0.2% of advances over FY09-12E.
We expect MAGFIL to report RoAs of 5%+ and RoEs of 35%+ over FY09-12E. The stock valuations at 2.3x FY12E ABV are quite attractive. As has happened with many other NBFCs, we expect MAGFIL's valuations to track its balance sheet growth. We recommend BUY with a TP of Rs900, valuing it at 3x FY12E ABV.
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