Muthoot Finance shares rise 4%, test record high post Q4; analysts upbeat

Muthoot Finance Q4: Muthoot Finance clocked its highest-ever consolidated loan asset under management (AUM) of Rs 89,079 crore in Q4FY24

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Muthoot Finance share price: Muthoot Finance shares rallied 4.3 per cent to Rs 1,745 apiece on the BSE in Friday's intraday trade, moving closer to their record high level, after the gold financier reported a healthy set of earnings for the March quarter (Q4) of fiscal year 2023-24 (FY24).

At 9:41 AM, the shares were slightly off highs, up 1.13 per cent at Rs 1,692 per share as against the 0.73 per cent gain in the benchmark S&P BSE Sensex. The stock hit a record high of Rs 1,762 per share on May 28, 2024.

For the March quarter, Muthoot Finance reported a 17 per cent year-on-year (Y-o-Y) increase in net profit at Rs 1,056.3 crore, relative to a profit of Rs 902.6 crore posted in the year-ago period. Operationally, its net interest income (NII) came to Rs 2,134.8 crore, up around 15 per cent on year. Further, consolidated loan assets under management increased by 8 per cent during the quarter.

For the entire fiscal year, Muthoot Finance clocked its highest-ever consolidated loan asset under management (AUM) of Rs 89,079 crore, up 25 per cent Y-o-Y, and highest-ever standalone Loan AUM of Rs 75,827 crore, up 20 per cent Y-o-Y.

PAT was also at record level of Rs 4,468 crore (consolidated; up 22 per cent Y-o-Y) and Rs 4,050 crore (standalone; up 17 per cent Y-o-Y).

Muthoot Finance also recorded its highest-ever gross Gold loan advance in any year at Rs 165,746 crore, with the highest-ever Gold loan advance to new customers in any year at Rs 16,415 crore.

That apart, Muthoot Finance reported an 18-per cent increase in Gold Loan AUM at Rs 11,003 crore.

"Muthoot Finance reported 7 per cent Q-o-Q loan growth, likely reflecting some gains from IIFL Finance and a rally in gold prices. The ban on IIFL Finance effected from early March benefited Muthoot Finance for one month of the quarter. Recent trends suggest some moderation in gold loans by banks as well; this will also benefit Muthoot and other incumbent players. Coupled with a massive rally in gold prices (up 15 per cent in FY24), Muthoot is well-placed in delivering high-teens loan growth in FY2025," said analysts at Kotak Institutional Equities in their result review report.

The brokerage expects Muthoot Finance to clock 18 per cent earnings CAGR during FY2025-27E due to 16 per cent loan book CAGR and expansion in margins over the medium term. It has assigned an 'Add' rating and a higher target price of Rs 1,850.

Going ahead, the management has maintained guidance of 15–16 per cent gold AUM growth in FY25E. Besides, in the non-gold segments, microfinance (MFI), personal loans (PL), and HL segments are likely to witness higher traction led by the new team and strong underwriting processes, while vehicle financing (VF) segment growth could remain muted. 

During the quarter, incremental cost of borrowings stood at 8.8 per cent and management expects the cost to rise to 9.0 per cent in the next one–two quarters.

Nuvama Institutional Equities, thus, has increased their FY25E/26E EPS by 4–6 per cent, along with a higher target price of Rs 1475 (from Rs 1,280) due to declining

competitive intensity and regulatory checks that have halted irrational lending by competitors.

The brokerage, however, has retained its 'Reduce' call as the stock has rallied sharply since Q3FY24 earnings due to regulatory action on competitors and a sharp increase in gold prices.