Shares of gold loan company Muthoot Finance will be in the spotlight after a robust performance in the June quarter, with brokerages reaffirming their positive outlook and projecting an upside potential of up to 20 percent, driven by loan growth prospects.
The company posted its highest-ever consolidated net profit of Rs 1,196 crore.
Jefferies maintained a 'Buy' on Muthoot Finance with a target price of Rs 2,220 per share, underscoring the better-than-expected loan growth due to rising gold prices. Although non-performing gold loans increased slightly by 0.7 percent from the previous quarter, analysts believe the Loan-To-Value (LTV) ratio of 54 percent limits any significant risk.
A higher LTV indicates that the gold backing the loan is worth significantly more than the loan amount.
Likewise, Bernstein maintained an 'Outperform' on Muthoot Finance, with a target price of Rs 2,000 per share. Despite a sligfht dip in margins, Muthoot saw improved operating leverage. Analysts noted the secured nature of company's loan products and an average LTV ratio of 63 percent, which provides confidence to keep full-year credit cost estimates unchanged.
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Muthoot Finance reported highest-ever consolidated net profit of Rs 1,196 crore in Q1FY25, marking a 14 percent increase from Rs 1,045 crore a year back. The Kochi-based lender also achieved record-breaking consolidated loan assets under management (AUM) of Rs 98,048 crore, reflecting a 28 percent rise. Additionally, the company saw its gold loan AUM reach an all-time high, with an increase of Rs 14,883 crore, growing by 23 percent YoY.
The management said they continue to focus on diversifying the loan book to non-gold segments, including microfinance loans, personal loans, and home loans. The group opened 218 new branches in Q1FY25, taking the total branch network to 6,759.
So far this year, the stock of this gold financier surged over 25 percent, outperforming benchmark Nifty 50's 11 percent rise.
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