LKP Research's research report on Muthoot Finance
Muthoot Finance (MFL) delivered a strong quarterly performance, supported by favourable macro conditions and robust demand for gold loans amid rising gold prices. Margins expanded on higher yields and are expected to remain range-bound, aided by lower borrowing costs in a declining interest rate environment. Additionally, asset quality improved despite a challenging macro backdrop and is expected to remain stable, supported by surplus provisioning and improved collection efficiency. The company has consistently demonstrated healthy profitability, even during adverse market conditions. We expect MFL to deliver ROA/ROE of 5.3%/22.8% for FY27E, driven by its expanding reach, favourable funding environment, and the growing preference for gold finance in uncertain economic times.
Outlook
Accordingly, we reiterate our BUY rating on the stock, based on a Sum-of-the-Parts (SOTP) valuation, with a revised target price of ₹3,048.
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