This financial sector stock fell 12% today, buy it for a target price of Rs 1431
Stock market outlook
The current market price of the share is Rs 1039 each. It fell 12.47% in trading today. The 52-week high is Rs 1722 each and the 52-week low is Rs 961 each. The title fell by 29% in 1 year. It gave a return of 63% in 3 years and 129% in 5 years. If you buy it at its current market price, it can offer you a gain of 37.6% with a target price of Rs 1431 each.
Decline in loans driven by lower gold loan assets under management
MUTH recorded a 2% QoQ decline in loan portfolio to Rs 567 billion, but up 7.7% year-on-year, due to a 2.4% QoQ decline in gold loans to Rs 562 billion . A 5% decrease in tonnage QoQ (178 tonnes vs. 187 tonnes in Q4 22) and the reduction in the number of active customers who were offered promotional rates led to lower gold AUMs. Lower yields due to the residual teaser book affected NIMs, with yields falling to a low of 17.3% in Q1’23.
Management said that as of June 30, all ad rates have been migrated to higher rates. The positive impact of the teasing rate was that the company was able to attract high-value new customer assets into the book. Now, the company is working to retain these new customers, even after the promotional rates have been discontinued. On the subsidiary side, Belstar and Muthoot Homefinance recorded growth of 8% and 0.3% QoQ in their assets under management.
Asset quality improves through improved recoveries
The gold lending business which contributes over 90% of the company’s overall assets under management recorded an ARNP of 2.13% versus 2.99% in Q4’22. Bidding for the quarter amounted to 13.7 billion rupees.
According to Prabhudas Lilladher, “We have maintained our EPS estimates for FY23 and FY24, as we expect returns to improve from 17.3% to 18-19% over the coming quarters as teaser loans are repriced We maintained a CAGR of 14% in FY22-24 gold AUM pound Our base pound multiple stands at 2.4x PABV Sep’24E Thereafter our SoTP is maintained at Rs. 1,431. Repeat BUY.
About Muthoot Finance
The company offers gold loans on very simple terms to people in every segment of society. Its gold loan range starts from ₹1500 and there is no maximum limit. Driven by the invaluable trust and commitment people have shown in us over the centuries, it has created a reputable market image. It has a market capitalization of Rs 41,735.35 crore.
The stock was picked from Prabhudas Lilladher’s brokerage report. Greynium Information Technologies, the author and the respective brokerage are not responsible for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.