Neutral Muthoot Finance; target of Rs 2300: Motilal Oswal

Motilal Oswal's research report on Muthoot Finance

Muthoot Finance (MUTH)’s strong operating performance in 3QFY25 was characterized by: 1) strong gold loan growth of ~34% YoY to ~INR930b, without any trade-off in margins; 2) ~5bp QoQ expansion of NIM to ~11.9%; and 3) an increase in gold tonnage by ~2% QoQ to 202 tons. MUTH’s 3QFY25 PAT grew 33% YoY and 9% QoQ to ~INR13.6b (in line). Reported RoA/RoE in 3QFY25 was healthy at 5.9%/21%. Net total income grew ~42% YoY to ~INR27.8b (~6% beat). Opex grew ~27% YoY to INR7.2b, resulting in a cost-to-income ratio of ~26% (PY: 29%). PPOP grew ~48% YoY to ~INR20.6b (~6% beat). Credit costs stood at ~INR2.1b and translated into annualized credit costs of ~0.9% in 3QFY25. [PY: ~0.1% and PQ: ~0.95%]. Gold loan growth was supported by growth in gold tonnage (up 2% QoQ), along with an increase in the customer base (up 2% QoQ) to ~6.25m. Gold loan LTV rose ~310bp QoQ to ~66%.

Outlook

However, we believe that the positives are already factored in its valuations. We reiterate our Neutral rating with a revised TP of INR2,300 (based on 2.5x Sep’26E P/BV).

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