Manappuram Finance shares drop 3% even as Q2 net profit soars 3x to Rs 701 crore. Why did Jefferies cut target price?

Shares of Manappuram Finance dropped around 3% on Friday after the company reported a consolidated net profit of Rs 701 crore for the July-September quarter of the ongoing financial year 2027, surging over 3 times from Rs 220 crore reported in the corresponding quarter of the previous financial year.

The gold loan provider’s revenue from operations jumped 48% year-on-year to Rs 3,362 crore during the quarter under review, from Rs 2,274 crore reported in the same period last year. The company’s total expenses jumped more than 23% YoY to Rs 2,434 crore, from Rs 1,973 crore reported in the year-ago period.

Manappuram Finance’s gold loan and other segment recorded around 54% YoY rise in revenue to Rs 3,043 crore, while that for micro finance rose over 12% YoY to Rs 329 crore. The company’s standalone assets under management expanded 69% year-on-year to Rs 63733 crore at the end of September. The shares of the company dropped to Rs 311 apiece on NSE on Friday morning.

Also read | Manappuram Finance Q2 results: Profit soars 77% YoY, but NPAs rise

Jefferies on Manappuram Finance share price

Jefferies maintained its ‘Buy’ rating on Manappuram Finance shares but reduced its target price to Rs 400 apiece from Rs 430. The latest target price implies 25% upside potential from the stock’s previous closing price of Rs 320 apiece on NSE.

The international brokerage noted that the company’s Q2 profit was 5% ahead of its estimates as higher net interest income offset higher provisions. It expects branch expansion and customer growth to drive 23% gold loan growth and 18% consolidated AUM growth in FY27. The company’s NIM rose 63 basis points sequentially to 11%, while gold loan yields rose 30 basis points QoQ to 18%, likely driven by customers slipping into higher-yielding (lower-rebate) slabs with longer repayment cycles, as per the rebate pricing structure, as well as penalty charges. Mannapuram Finance plans to price its loans competitively, but expects gold loan yields to sustain at 17.5-18%.

However, the company saw some stress in shorter tenure schemes like peers. Its management indicated incremental trends are better as customers adapt, although the company is gradually shifting to longer tenure schemes.Also read | Manappuram Finance’s Stage 2 gold loans jump tenfold to 5%

Jefferies raised FY27-28 EPS estimates by 3-4%, factoring in lower AUM growth, better NIMs, lower opex & higher credit costs. It highlighted that the spot gold price is down 7% since September and may remain range-bound over the near term amid Fed rate hikes. “We expect profit to rise 3x (off weak FY26 base) with ROE improving to 14% (7% FY26) over FY26-28. At 1.4x FY28 BV, valuations seem reasonable,” the international brokerage said.

Disclaimer: This article has been written by Debaroti Adhikary, who is not a SEBI-registered Research Analyst or an Investment Adviser. Debaroti Adhikary and his/her ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclaimers here.