Accumulate Muthoot Finance; target of Rs 2140: Geojit Financial Services

Geojit Financial Services recommended accumulate rating on Muthoot Finance with a target price of Rs 2140 in its research report dated October 10, 2024.

Broker Research

October 11, 2024 / 10:41 IST

Accumulate

26 Aug, 2025 12:21

Volume

Todays L/H

Geojit Financial Services research report on Muthoot Finance

Muthoot Finance, India’s largest NBFC in gold loans by loan portfolio, operates over 6,759 branches nationwide. Besides gold loans, it offers various loans, insurance, money transfer services, and gold coin sales through its subsidiaries. We anticipate the loan AUM to grow at a CAGR of 16% over FY24-26E, driven by increasing gold prices, reduced competitive intensity, and a projected decline in unsecured lending options due to rising credit risks. Yields are expected to stabilize at current levels (~18.0%) due to decreased competition in the gold segment. In this lower yield scenario, the company anticipates a 19% CAGR in profits for FY24-26E, driven by higher AUM and improved operational leverage. Customer acquisition will be driven by branch expansion, with management planning 150-200 new branches annually. This scaling up will boost loan growth and support future growth. Muthoot maintains higher provisions than its closest peer due to a more conservative auction policy, aimed at preserving customer relationships. Despite this, asset quality risk remains low due to lower LTV ratios (LTV Q1FY25~63%) and the rally in gold prices.

Outlook

Given gold’s stability as a secure asset class and the expected ROE improvement by FY26, Muthoot merits a premium valuation. We initiate coverage with an “Accumulate” rating and a target price of ₹2,140 based on the SOTP valuation method.

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