12/05/2022
So Manappuram made another 52 week low today at 103. If one looks at the price chart, the company had touched a similar price for the first time in 2016. Let’s compare some numbers between that time and today.
Revenue
2016 - 2369
2022 (Expected) - 6202
Net Profit
2016 - 353
2022 (Expected) - 1536
Book Value
2016 - 2758
Sep 2021 - 7970
So effectively while the Book value has gone almost 3x, Revenue 3x and Net Profit 5x you are getting this business for a similar price. So at 1.1x Book value one gets an NBFC with with consistent 25%+ ROE, 5 year Sales Growth of 22% and PAT growth of 37%. Also, most importantly negligible NPAs over the years (baring exceptional circumstances)
This past year has not been the best for Manappuram and there is talk of it losing market share to other NBFCs but we will need to monitor the situation for a few quarters or a year or two to actually see the long term impact it can have. The unorganized sector of Gold based lending is still so huge that there may be enough room for multiple players to go. I think at 1.1x book value, a lot of the pessimism is already priced in.
Manappuram is still a strong brand name with years of great ex*****on behind it. The narrative has changed with the fall in stock price (from gold loan being the safest kind of NBFC to suddenly having no moat) but I believe the business quality is still very good. Plus whenever the Microfinance cycle turns, it will benefit a great deal from that as well (Asirvad is one of the largest and well diversified MFIs in the country).
All in all looks like a heads I win, tails I don’t lose much situation.
