Muthoot Finance's gold AUM growth remain strong backed by high gold prices and moderating competitive intensity. Further, growth guidance has been maintained at 25% while need to watch out for higher credit cost as stage III assets have increased in last few quarters.
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IDBI Capital Report
Muthoot Finance Ltd. reported gold loan growth of 34% YoY versus 28% YoY (Q2 FY25) led by higher gold prices and new customer additions. Overall AUM growth improved to 37% YoY vs 31% YoY (Q2 FY25). Management maintained guidance at 25% gold loan growth for FY25 and 15% for FY26.
We expect 15% CAGR (FY25-27E) gold loan growth. Net interest margins improved slightly QoQ led by improvement in yields. Net interest income grew strongly by 43% YoY; pre-provision operating profit grew by 48% YoY led by lower operating expenses (up 27% YoY).
Provisions increased by two-times YoY due to higher write offs; PAT grew by 33% YoY. Stage III loan assets declined to 4.2% vs 4.3% QoQ, on high base.
We have rolled over to FY27 estimates and maintain the ‘Hold' rating with a new target price of Rs 2,416 (earlier Rs 2,015), valuing it at 2.4x price/book value FY27E.
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