Buy Muthoot Finance; target of Rs 550: Motilal Oswal

Motilal Oswal's research report on Muthoot Finance

Muthoot Finance’s (MUTH) 1QFY18 PAT grew 30% YoY (and 9% QoQ) to INR3.51b (in -line). Though there was a 5% revenue miss, it was offset by lower -than -expected provisioning. AUM growth remained anemic at 8% YoY (2% QoQ) to INR278b. The management has guided ~10% AUM growth in gold loans for the year, with potential upside, given the improvement in overall environment. However, the management targets 10% share of AUM from the non- gold loan book by end- FY18 and 15% share by FY19.

Outlook

We downgrade our FY18/19 EPS estimates by 6 -7% to factor in lower growth. BUY with a TP of INR 550 (2.4x FY19E BV).