Shares of gold loan provider Muthoot Finance Ltd climbed 7 per cent in Thursday's trade, following solid Q3 results. The NBFC reported a gold loan growth of 34 per cent YoY without any trade-off in margins and a 5 basis points expansion in net interest margin (NIM) sequentially. Gold tonnage and customer based also rose 2 per cent each sequentially. A few brokerages are neutral to positive on the stock post Q3 results.
Shares of Muthoot Finance climbed 7 per cent to hit a high of Rs 2,335 on BSE. The stock is up 31.07 per cent in the past three months.
For FY26, Muthoot Finance maintained its conservative guidance of 15 per cent growth in gold loans, MOFSL said as it increased its FY26 and FY27 estimates by 7 per cent each to factor in higher gold loan growth and margins. It is expecting a standalone AUM CAGR of 20 per cent over FY24-27, which would result in a PAT CAGR of 22 per cent over this period.
"Muthoot Finance now trades at 2.2 times FY27 P/BV and, in our view, has benefited from the tailwinds of: 1) a sharp rise in gold prices; 2) an improvement in gold loan demand due to the industry-wide rationing in unsecured credit; and c) a lower competitive intensity in gold loans. Muthoot is indeed one of the best franchises for gold loans in the country. However, we believe that the positives are already factored in its valuations," MOFSL said.
It has reiterated its 'Neutral' rating with a revised target price of Rs 2,300.
Nirmal Bang Institutional Equities maintained its 'Buy' rating on Muthoot Finance with a revised target price of Rs 2,589. Its target multiple for the standalone Muthoot Finance business is at a 20 per cent premium to the past 5-year average P/ABV of 2.6 times.
"Given a consistent performance from Muthoot, gold price moving up and other lending segments/lenders putting up a mixed performance on growth and NPLs, we upgrade Muthoot to ‘BUY’ from ‘REDUCE’. We are increasing target price to Rs 2,550/3.1x FY26E BV from 2.4 times. Muthoot is not an immediate beneficiary of falling rates with uncertainty on whether it will have to maintain 75% LTV through the life of the loan," said Nuvama.
Many lenders have talked about the regulator asking them to do EMI-based loans against bullet loans, not rolling over loans and maintaining LTV of 75 per cent through the life of the loan not just on disbursement.
While Muthoot may not be fully in sync with these rules, the CEO clarified that the company has not been specifically asked by the regulator to change any practice, and it is business as usual for Muthoot, Nuvama noted.