Manappuram Finance shares decline nearly 4% even after CLSA upgrade on Q2 results

Detailed summary

CLSA said that it factors in one more repo rate hike from the RBI but raises its FY27-29 Profit After Tax (PAT) estimates for Manappuram Finance by 1%-6% on stronger PPOP. It believes the risk-reward is now favourable post the recent correction in the stock.

Shares of Manappuram Finance Ltd. declined nearly 4% on Friday, November 13, even as global investment banking firm CLSA upgraded its rating post the company's second quarter results.

CLSA has upgraded the stock to "outperform" from its earlier rating of "hold" and has raised its target price on the stock to ₹370 per share from ₹350 earlier. This indicates an upside of 15.7% from its previous closing price.

Manappuram Finance's second quarter profit after tax (PAT) beat estimates by 3% as higher provisions partly offset a 9% pre-provisioning operating profit (PPOP) beat. The latter was driven primarily by better-than-expected margins, CLSA said.

Over the past two quarters, Manappuram Finance has struck a better balance between growth and margins, with gold loans yields improving 90 basis points in the first half of the finaincial year 2027 without compromising much on growth, CLSA's note said.

The company's gold loan book grew 6% sequentially, driven by 4% tonnage growth and stable loan to value, it said.

Manappuram Finance continues to contain opex well and expects the expense ratio to trend down, CLSA said, adding that the company's credit costs were higher-than-expected due to an increase in Stage 2 loans, but it believes this would not result in an end loss.

CLSA said that it factors in one more repo rate hike from the RBI but raises its FY27-29 Profit After Tax (PAT) estimates for Manappuram Finance by 1%-6% on stronger PPOP. It believes the risk-reward is now favourable post the recent correction in the stock.

Manappuram Finance reported a strong set of earnings in the second quarter. However, its asset quality is a key monitorable.

On a standalone basis, company's PAT increased 76.9% to ₹665 crore from ₹376 crore last year and was up 20.5% from the previous quarter's ₹552.5 crore.

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