Shares of Manappuram Finance surged in early trade on Wednesday, following the non-banking financial company’s (NBFC) robust performance in the second quarter.

What Happened: The company posted a year-on-year growth of over 36% in its consolidated net profit, reaching ₹560.65 crore for the quarter ended September. The strong result has led several brokerages to maintain their bullish stance on the company.

Manappuram Finance reported a net interest income rise of 25.6% to ₹1,467.3 crore in the July-September quarter, compared to ₹1,377.9 crore in the same period last year. The consolidated assets under management (AUM) increased by 27% year-on-year to ₹38,950 crore, with the gold AUM expanding by 8%.

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To mitigate cyclicality in the gold loan segment, the company has actively diversified into non-gold segments. The share of non-gold products in the firm’s AUM mix stands at 47%, up from 37% in the same quarter last year. Analysts caution the company to tread carefully in the non-gold segments.

Brokerage Predictions: Morgan Stanley, retaining its “overweight” call on the gold financier, praised Manappuram Finance for beating the profit after tax estimate by 10%, citing expanding gold loan yields. The global brokerage firm increased its target price on the company to ₹200 apiece, a 38.1% upside from the closing price on November 13.

BofA Securities noted the earnings surprise, emphasising strong fee income and lower operating expenses. The primary focus for this fiscal year will be on profitability and portfolio diversification. The management has guided for gold loan growth of 8-10% year-on-year in FY24 and aims to maintain pricing discipline despite high competition.

On November 13, the NBFC declared an interim dividend of ₹0.85 per equity share with a face value of ₹2.

Price Action: Manappuram Finance’s share price was up 7.77% at ₹151.25 around noon on Wednesday.

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