Neutral Muthoot Finance; target of Rs 1300: Motilal Oswal

Motilal Oswal 's research report on Muthoot Finance

Muthoot Finance's (MUTH) 1QFY21 PAT increased ~60% YoY to INR8.4b (2% miss). While total income missed our expectations by 8%, it was offset by lower opex and credit costs. However, according to management, the cost reduction is one-off and unlikely to sustain. As the company opened branches in May'20, it witnessed more collections than disbursements. Hence, its loan book declined marginally QoQ.

Outlook

However, this is likely to be a drag on margins going ahead. While MUTH's subsidiaries have witnessed improving collection efficiency, we remain cautious on the asset quality outlook. Maintain Neutral with TP of INR1,300 (3x FY22E BVPS).

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