Edelweiss's research report onMuthoot Finance
Muthoot Finance (Muthoot) reported in-line PAT of INR4.5bn (flat QoQ) in Q4FY18. Key highlights: a) modest gold loan AUM growth due to weak underlying demand; b) revenue momentum sustained benefiting from lower borrowing cost & higher recoveries from six-months’ overdue loans; c) borrower-wise classification norms led to further rise in GNPLs to 7.0% (5.6% in Q3FY18);
OutlookPost a soft H1FY18, Q4FY18 saw some accretion in AUM (5%). We expect AUM growth to gather pace on enhanced demand from business segments post GST stabilisation. This, alongwith controlled costs and provisioning, is estimated to drive >20% earnings CAGR over FY17-20. At CMP, the stock trades at 1.7x FY20E P/ABV for RoA/RoE of >5%/20%. We maintain ‘BUY/SO’ with TP of INR568.
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