Buy Muthoot Finance target of Rs 1700: Prabhudas Lilladher

Prabhudas Lilladher is bullish on Muthoot Finance has recommended buy rating on the stock with a target price of Rs 1700 in its research report dated June 29, 2021.

Broker Research

June 30, 2021 / 04:27 PM IST

An Edelweiss research report for Q4FY21 says road tonnage continued to improve, evident in e-way bill generation (up 6% QoQ) and improved core trucking rentals. “We estimate tonnage would increase by three–five percent for truckers. Asset-light plays Mahindra Logistics and TCI Express remain our preferred picks due to their ability to scale up/down as the environment demands,” the report said. Edelweiss is bullish on Blue Dart Express due to the pandemic-induced boom in e-commerce and its leaner cost structure. It has retained a ‘buy’ call on Mahindra Logistics, TCI Express and Blue Dart Express.

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Prabhudas Lilladher's research report on Muthoot Finance

We have revised our estimates higher for NII by 10% and EPS by 6% for FY23. We expect rich return profile (6.3-6.5%:RoA, 22-23%:RoE) over FY22-23 led by; (a) the recent long term ratings upgrade resulting into reduction in cost of funds (we factor 40bps reduction in FY22) (b) healthy 18% AUM CAGR, steady customer accretion (sustainable 5%YoY growth), (d) superior asset quality (<1.5% GNPA, auctions at <0.5%). MUTH remains our top pick in the NBFC space.

Outlook

We reiterate ‘BUY’ rating on MUTH and tweak our core book multiple higher to 3x PABV FY23E (earlier 2.7x) arriving at SOTP price target of Rs1,700 (standalone: Rs1,686, subsidiary: Rs14) (earlier Rs1,486).