Dolat Capital Market's research report on Muthoot Finance
Muthoot reported a healthy quarter with 6.5% QoQ/28% YoY growth in gold book along with slight sequential improvement in spreads (+10 bps) driven by higher yields and contained opex aiding PAT growth of 26% YoY despite higher provisions from GL/PL delinquencies. GL delinquencies are technical, with LTV at 55% in the NPA book, while PL NPAs are fully provided for. MFI/PL delinquencies were higher QoQ but remain well provided for. We continue to see healthy customer acquisition in GL business in Q2 (similar to Q1), with 4% QoQ growth in active customer count. Growth guidance has been raised to 25% for standalone book in FY25E, post 18% growth in H1 (Mar-Sep). The slowdown in unsecured lending has been contributing to growth in GL business.
Outlook
Higher growth and lower opex is offset by a rise in credit costs. Maintain ‘BUY’ rating with TP of Rs 2150, valuing the NBFC at 2.5x Sep-26E ABV against RoA/RoE of 5.2%/19%. We like the NBFC for its high brand recall, customer centricity and low opex.
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