Muthoot Finance Q4 Results Review: Analysts Raise Earnings Estimates, Target Price
The company's fourth-quarter net profit grew to Rs 973.5 crore, beating the estimate of Rs. 9,417 crore as per Bloomberg data.
After Muthoot Finance Ltd.'s fourth-quarter profit exceeded analysts' expectations, most brokerages revised upward the company's earnings estimates and target prices.
The company's net profit grew to Rs 9,735 crore in the quarter ending March, according to an exchange filing, beating the estimate of Rs 9,417 crore as per Bloomberg data.
Muthoot Finance Q4 FY23 (Consolidated, YoY)
NII grew by 8% to Rs. 2,043 crore.
AUM is up 10.9% to Rs. 71,496 crore.
Gold loans stood at Rs. 61,875 crore, a 7.6% increase.
NIM was 40 basis points higher QoQ at 12.3% as compared to 11.9% the previous quarter.
Shares of Muthoot rose 8.24% to Rs 1,120.2 apiece, compared to a 0.56% gain in the NSE Nifty 50 as of 2:41 p.m.
Of the 25 analysts tracking the company, 15 maintain a 'buy', two suggest 'add', one recommends 'accumulate,' two maintain 'hold', two maintain 'neutral, two maintain 'reduce', and one suggests a 'sell' rating, according to Bloomberg Data.
Here’s what brokerages have to say about Muthoot Finance's Q4 FY23 results:
Haitong
Retains an 'outperform’ rating and raises the target price to Rs 1,335 from Rs 1,320.
The company completed its target of adding 150 gold loan branches. The management would seek the RBI’s approval for adding 150–160 new branches by FY24.
Belstar Microfinance and Muthoot Money (Vehicle Finance Subsidiary) had an AUM of Rs 6,190 crore and Rs 390 crore, respectively, a growth of 42% and 87%, respectively, year-on-year.
Muthoot’s Housing Finance subsidiary’s AUM declined by 2% year-on-year.
The company’s Microfinance, Vehicle Finance, and Home Finance subsidiary’s Stage 3 loan assets to gross loan assets improved to 1.85%, 3.7%, and 3.0%, respectively, in this quarter versus 6.2%, 7.5%, and 3.2%, respectively, in the previous quarter.
Standalone Stage 3 deteriorated sequentially to 3.8% in March from 2.58% in December 2022 as management gave an extra time period for gold loan customers who slipped into NPA to retain customers.
The brokerage expects a consolidated RoE of 19.1% and a post-tax RoA of 5.3% by FY25.
Elara Capital
Maintains ‘accumulate’ with a target price of Rs. 1,200, implying an upside of 16%.
The brokerage suggests a switch from Manappuram Finance to Muthoot Finance on account of the latter’s improving business growth visibility and volume growth.
Upward revision of FY25 net profit estimate to Rs 4,761 crore from Rs 4,697.4 crore
Net interest income was also revised upward by 2.7% and 3.4% for FY24 and FY25, respectively.
Healthy gold loan growth at 8.9% quarter on quarter, which can be attributed to:
Seasonality
Continued gold price momentum
Increase in tonnage to 180 tonnes in Q4 from 175 tonnes in the previous quarter
Improved business productivity
Increased marketing initiatives to tackle competition
Non-gold business (12% share) saw traction from microfinance (up 16% QoQ) and vehicle book (up 32% QoQ).
Muthoot aims to restrict the non-gold portfolio’s share to under 20% in the long term.
The brokerage estimates GNPA at 2-2.5% for FY24–FY25.
Morgan Stanley
Maintains an 'equal-weight’ rating with a target price of Rs 1,150, implying a 11% upside to the price target.
Profit tax misses the brokerage’s estimates by 3% at Rs 9,030 crore on account of higher operating and credit costs.
Overall standalone AUM was up at Rs 63,200 crore—9% QoQ and YoY; standalone non-gold AUM grew to Rs 1,330 crore—47% QoQ and 156% YoY.
EPS estimates for FY24 and FY25 were raised by 2.8% and 4.2%, respectively, with higher loan growth assumptions.
NII and total income estimates for FY24 were revised upwards by 2.7% and 2.9%, and for FY25 by 4.9% and 5%, respectively.
Muthoot Finance's strong brand name, gold loan growth track record, and almost entirely gold loan business earnings make it more resilient to asset quality downturns.
As per the brokerage, gold loan growth will remain a challenge, and diversification will be the key to ROE and EPS growth.
CLSA
Maintains an 'underperform’ rating with a target price of Rs. 1,140, implying an upside of 10%.
Strong loan growth of 9% QoQ to Rs 62,000 crore, with 3% driven by tonnage growth and 6% driven by pricing growth
Management-guided 15% loan growth in FY24 is possible, given the rise in gold prices of 7–8%.
Opex came in at Rs 631.4 crore, 18% higher than the estimated Rs 533.1 crore, on account of higher branch-level marketing and a higher employee count.
The RoA estimate for FY24 increased to 5.5% from 5.3% and was maintained at 5.5% for FY25.
RoE estimates were revised upward to 18.7% and 18.2% for FY24 and FY25, respectively, as against 17% and 16.7% earlier.
Net profit estimates are up by 5.3% and 2.2% for FY24 and FY25, respectively.
As GNPL increased 120 basis points to 3.8%, the brokerage highlights the risk of higher auctions leading to suppressed loan growth if NPLs increase further.
