Buy Muthoot Finance; target of Rs 1431: Prabhudas Lilladher

Prabhudas Lilladher's research report on Muthoot Finance

Muthoot Finance (MUTH) recorded muted loan growth (1% QoQ growth and 3.8% YoY growth) to Rs 572bn (Ple:Rs 584bn) as gold loan AUM grew by 0.6% QoQ to Rs 565bn. Last quarter there was a 2.4% QoQ de-growth in gold loan AUM. Yields improved marginally (up by 8bps QoQ to 17.38% due to discontinuation of teaser rates). PAT at Rs 8.6bn (up 8.1%QoQ and down 12.8% YoY) came above our estimates of Rs 8.2bn on account of lower opex which was down 16.8% QoQ and up 2.8% YoY at Rs4.5bn(Ple:Rs5.5bn). Write back of provisions to the tune of Rs 0.12 bn also aided PAT. Higher yields resulted in rise of NIM to 11.0% vs 10.7% in Q1’23.

Outlook

We have maintained our EPS estimates for FY23 and FY24 as we expect yields to improve from 17.38% to 18-19% in the coming quarters as teaser loans have been re-priced and it looks like yields have bottomed out. We have maintained a 14% CAGR in gold AUM book from FY22-24. Our core book multiple stands at 2.6x PABV Sep’24E. Subsequently our SoTP is maintained at Rs. 1,431. Reiterate BUY.