Muthoot Finance shares surged 5% on the morning of February 15 following the company’s announcement of a 14% rise in net profit for the December quarter. Despite this positive performance, brokerages maintain caution due to margin concerns.
Over the past month, the stock of this gold financing company has declined by over 6%, compared to a 2% drop in the benchmark Sensex index.
CLSA analysts issued an “underperform” rating on Muthoot Finance, setting a target price of Rs 1,440 per share. The brokerage noted potential improvements in net interest margin (NIM) but warned of likely increases in the cost of funds. Additionally, they highlighted that the company’s subsidiary, while performing well on growth, only accounts for 10% of consolidated assets under management (AUM). Muthoot Finance reported a 27% increase in revenue for the third quarter compared to the same period last year.
Meanwhile, analysts at Morgan Stanley maintained an “underweight” rating with a target price of Rs 1,165 per share. They noted that the NIM of 10.9% fell below their estimate of 11%, although AUM growth and pre-provision operating profit (PpOP) were in line with expectations. Additionally, Muthoot Finance approved raising up to Rs 16,000 crore through non-convertible debentures.
The company’s standalone loan assets under management (AUM) increased by 23%, while gold loan AUM grew by 22% for the nine months ending December 31.
George Jacob Muthoot, Chairman of Muthoot Group, expressed intentions to capitalize on growth opportunities in affordable housing, microfinance, personal loans, and vehicle finance, aiming to increase the share of subsidiaries to 18%-20% over the next five years.
Recently, smaller competitor Manappuram Finance reported profits exceeding estimates, primarily driven by growth in non-gold loan segments.
