Muthoot Finance shares rally 4% post Q4 results. Should you invest?

Shares of Muthoot Finance rose 4.3% on Friday on the BSE to day’s high of Rs 1,745 after the company reported a profit after tax of Rs 1,056 crore, rising 17% year-on-year (YoY) against Rs 903 crore for the same period last year.

Muthoot also posted its highest-ever consolidated loan assets under management at Rs 89,079 crore, rising 25% YoY and a strong YoY Growth in Loan Assets of Rs 12,617 crores in FY 2024, up by 20%.

Here is how brokerages viewed the Q4 updates:


Kotak Institutional Equities

In the near term, migration to digital lending (following cap on cash disbursements to Rs20,000) and a rise in funding costs may exert pressure. Gains from IIFL Finance and likely lower aggression by banks will augur well over the medium term.

KIE has an 'add' rating on the stock with a target price of Rs 1,850.

CLSA

Muthoot Finance saw a 70bp expansion in its margin, which is in contrast to Manappuram. The management is also optimistic about delivering +15% gold loan growth in FY25 while separately, it has guided for an increase in its cost of funds.

With this, CLSA has an 'underperform' rating for Muthoot Finance with an increased target price of Rs 1,700.

Also read: Asia stocks gain, dollar drifts as inflation tests await

Nuvama

Muthoot posted a strong beat on NII but a small beat on PAT in Q4FY24 due to higher provisions and opex. Benefitting from the improving competitive landscape, the company reported strong core growth with standalone AUM up 7% QoQ (gold 5% QoQ) and NIM improving 7bp QoQ on the back of higher yields driven by lower discounts.

Due to declining competitive intensity and regulatory checks that have halted irrational lending by competitors, Nuvama has increased its target price to Rs 1,475 while maintaining a ‘reduce’ rating on the stock.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)