Manappuram Finance shares jump 7% today; can they revisit 52-week high level in near term?

Shares of Manappuram Finance Ltd rose sharply in Tuesday's trade, extending their gains for the second straight session. The stock climbed 6.76 per cent today to hit a high of Rs 117.65 over its previous close of Rs 110.20. Despite today's sharp rise, the scrip has declined around 9 per cent in the past one month after Enforcement Directorate (ED) conducted a search at its registered office. At today's high price of Rs 117.65, Manappuram's stock traded 12.14 per cent lower from its 52-week high of Rs 133.90, a level seen on April 19 this year.

The two-day upward move came on the back of a rise in the March 2023 quarter profit. The Thrissur, Kerala-based company reported a 58 per cent jump in Q4 FY23, helped by a boost in gold loan and micro-finance businesses. The non-banking financial company's (NBFC's) consolidated net profit rose to Rs 413 crore in the January to March quarter, from Rs 261 crore a year ago.

The company's interest income jumped 23 per cent to Rs 1,714 crore.

Manappuram's promoter and Chief Executive Officer VP Nandakumar faces an ED probe related to a private company he owned. The enforcement agency last week froze Nandakumar's assets, including the company shares. However, Nandakumar has said the enforcement action is not linked to Manappuram.

The company, in an exchange filing, said Nandakumar received an interim stay order on May 12, 2023, from the Kerala High Court against the ED order, dated May 4. The order also directs him to take the prior approval of the ED before dealing in the movable properties, the filing further read.

Prabhudas Lilladher (PL) has maintained a 'Buy' rating on the counter with a target price of Rs 144 over a 12-month period.

"Manappuram is on the right track, as growth in gold loan AUM returned plus management is confident of achieving 10 per cent growth in FY24. Microfinance, commercial vehicles, home loan, MSME/personal loans are also performing strongly with improving asset quality in microfinance business. We expect earnings to grow at 16 per cent CAGR over FY23-FY25 and standalone GNPAs to trend towards 1 per cent," the brokerage stated.

The company said it does not expect any challenges on the liabilities front due to the ED case, as the existence of the case is already known to stakeholders, PL said. Post this event also, Manappuram has received disbursements at similar terms, it further mentioned.

The brokerage also noted that the share of gold loans above Rs 2 lakh increased to 35 per cent from 28 per cent in FY22, whereas the share of loans between Rs 1 lakh to Rs 2 lakh stood at 24 per cent from 18 per cent in FY22.

On the technical front, support on the counter could be seen at Rs 108, an analyst said.

"Strong Q4FY23 results have led to a strong uptrend in Manappuram Finance stock price with strong support at Rs 108 on the daily charts. A daily close above resistance of Rs 118.5 could lead to targets of Rs 128-134 in the near term," said AR Ramachandran from Tips2trades.

Buy and accumulate this stock for an upside target of Rs 133 while keeping the stop loss at Rs 115, said Vaishali Parekh, Vice President - Technical Research at Prabhudas Lilladher.

"In Q4 FY23 results, the company posted a strong set of numbers. Valuation seems very attractive with a P/E (price-to-earnings) of 6.5x while the industry P/E is 23.9x. In the near term, the stock could hit the target of Rs 120, said Ravi Singh, Vice-President and Head of Research at Share India.

Manappuram may face stiff resistance in the 119-120 zone and post this a target price between Rs 125 and Rs 180 could be possible, said VLA Ambala, Research Analyst at Stock Market Today.

Meanwhile, Indian equity benchmarks traded lower in afternoon deals today, dragged by financials and banking stocks.

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