Whalesbook
Manappuram Finance: Growth and Recovery Drivers
Jefferies initiated coverage on Manappuram Finance with a positive outlook, setting a target price of ₹360 per share, implying a 22% upside. This optimism stems from the company's strong Q4 performance, which saw profit after tax (PAT) rise sharply to ₹404.79 crore, recovering from a loss last year. This was aided by a ₹130 crore release from provisions for Asirvad. Assets Under Management (AUM) grew 22% quarter-on-quarter to ₹63,800 crore, with gold AUM up 31%. Jefferies expects Net Interest Margins (NIMs) have stabilized and provisioning needs have peaked, forecasting 2.6x profit growth and an improved return on equity (ROE) to 13% by FY28.
The gold loan sector is facing new regulations. Effective April 2026, the RBI introduced tiered Loan-to-Value (LTV) ratios, making loans up to ₹2.5 lakh more accessible (up to 85% LTV) but requiring stricter checks for larger loans. Lenders must now release pledged gold within seven working days of repayment or face penalties.
Manappuram Finance's trailing P/E ratio of about 14.7x is competitive compared to Muthoot Finance's 15.79x. However, Manappuram's trailing ROE of 9.97% lags Muthoot Finance's 27.21% and IIFL Finance's estimated 18% for FY28, indicating potential for improved operational efficiency.
Cement Sector: Navigating Costs and Demand
For cement majors Ambuja Cements and ACC, Jefferies reaffirms 'Buy' ratings with target prices suggesting 34% and 29% upside respectively. Both companies faced challenges in the March quarter. ACC's net profit dropped 68% year-on-year to ₹238.25 crore because of higher fuel, diesel, packaging, and currency costs. Revenue, however, grew 18% to ₹7,124 crore, with sales volume reaching a record 11.9 million tonnes. Ambuja Cements reported a consolidated net profit of ₹1,830 crore, up 78.5% year-on-year, though this figure was significantly lifted by a ₹1,329.30 crore tax reversal. Operationally, Ambuja's EBITDA margin fell to 13.4% from 18.7% year-on-year.
Management at both Adani Group companies recognized execution difficulties and are adjusting expansion plans to stabilize current operations. Jefferies sees potential for improvement through better cost controls. The sector continues to face cost pressures, with petcoke prices up 7% year-on-year and fuel costs affected by global events. Increased government capital expenditure of ₹12.2 lakh crore for FY26-27, focused on infrastructure, roads, and railways, is expected to boost demand. ICRA forecasts cement volumes to grow 6-7.5% in FY26, driven by housing and infrastructure. Operating margins are expected to moderate to 16-17.5% in FY26 due to input costs.
Competitors like UltraTech Cement (P/E around 16.09x, ROE 26.69%) and Shree Cement (P/E 49.39x, EBITDA margin 24.47%) have different cost structures and market positions. Shree Cement's EBITDA margin of 24.47% notably exceeds Ambuja's 13.4% for Q4 FY26. Ambuja Cements is debt-free, while ACC's cost pressures are anticipated to continue into the first half of FY27.
Challenges and Risks Ahead
Despite Jefferies' optimism that Manappuram's NIMs have stabilized, a full recovery is not guaranteed. Increased competition in gold loans and possible new RBI interpretations could affect profitability. Higher LTV ratios for smaller loans might also increase credit risk if not managed carefully. Manappuram's ROE of 9.97% remains lower than peers like Muthoot Finance (27.21%) and IIFL Finance (estimated 18% for FY28), suggesting room for improvement in capital deployment or operational efficiency.
For the cement companies, Ambuja's reported profit jump was significantly boosted by a tax reversal, masking underlying operational challenges. ACC's sharp 68% profit drop in Q4 FY26, despite revenue growth, highlights the severe impact of cost pressures and execution issues, which management has acknowledged. These cost pressures, especially from fuel and logistics, are expected to persist into the first half of FY27. While government infrastructure spending is supportive, a slowdown in housing demand or continued global geopolitical issues affecting fuel prices could pressure margins. Ambuja's debt-free status is a strength, but ACC's financial position relative to peers like UltraTech or Shree Cement requires ongoing monitoring amid its current operational challenges.
Analyst Views and Sector Outlook
Other analysts also hold positive views on these sectors. Brokerages like JM Financial, Citi, CLSA, and HSBC also maintain 'Buy' or 'Outperform' ratings for Ambuja Cements, with average price targets around ₹638.75, lower than Jefferies' ₹595 target. ICRA forecasts stable to moderate growth in the cement sector, expecting operating profit to rise 12-18% in FY26. Margins may moderate in FY27 due to rising input costs. For Manappuram Finance, the key focus will be on sustaining gold loan AUM growth, achieving NIM recovery, and adapting to the evolving regulatory landscape.