Q3-FY11 earnings updates on Manappuram General Finance & Leasing: Keynote

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Q3-FY11 earnings updates on Manappuram General Finance & Leasing Ltd.

Manappuram General Finance and Leasing (MGFLL) reported 113% jump in Net Profit at Rs74.53cr in line with our estimates. Its AUM as of 3QFY11 increased by 188% to Rs6497.8cr from Rs2260.0cr in 3QFY10. As per the management guidance, AUM and Net profit will be around Rs8000cr and Rs280-290cr respectively in FY11.

Developments during the quarter

Ø   Strong business growth:

The total business as on Dec-10 was Rs 6824.6cr (Loans and advances of Rs5091.8cr, Retail borrowing Rs308.6cr and Assignments Rs1424.2cr) up by 28.8%.

Ø   Asset quality remains healthy:

The asset quality of the company is comfortable with Net NPA ratio of gold loans at 0.14%, and we expect the same to continue in another couple of years.

Ø   Well capitalized to fund future growth:

The company is comfortably placed in terms of capital requirement, as the CAR stood a healthy 32.5% as on 3QFY11 as against 15.5% a year ago. It is well capitalized and in a position to meet lending targets in coming years.

Valuation & Recommendation

At CMP of Rs132.35 the stock is trading at 3.69x FY10 price to adjusted book and is expected to trade at 2.98xFY11E and 2.52xFY12E price to adjusted book. On the basis of residual income model considering its book value of FY12E, we arrive at a target price of Rs165 per share with a Buy recommendation.