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Thursday, February 18, 2010

Mid Cap Stock To Buy - Manappuram General Leasing and Finance

Manappuram General Leasing and Finance is recommended stock to buy with a target price of Rs 900.

Stock investment research team of Emkay global financial research has recently released a stock research report on this.

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%+.

Market Cap 1,190.57
* EPS (TTM) 44.35
* P/E 15.56
* P/C 14.90
* Book Value 93.23
* Price/Book 7.40
Div(%) 25.00
Div Yield(%) 0.36
Market Lot 1.00
Face Value 10.00
Industry P/E 19.09

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.

It is recommended to buy stocks of Manappuram with a target of Rs 900, valuing it at 3x FY12E ABV.

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