Muthoot Finance Target Price Hiked 31% By Jefferies Amid Gold Price Rally

Jefferies has reiterated its bullish outlook on Muthoot Finance by highlighting the company's strong fundamentals, including net interest margin expansion and lower credit cost. The brokerage firm has even raised the target price for the counter by as much as of 31%.

Muthoot Finance is expected to benefit from the recent gold price rally, says Jefferies, which has maintained a 'buy' rating on the counter while raising the target price from Rs 2,950 to Rs 3,860.

Jefferies explains that the ongoing rally in gold prices should aid the company's loan growth while supporting margins.

“Higher gold prices should translate into faster loan growth, margin expansion, and lower credit costs,” the note said.

Jefferies expects Muthoot Finance's asset under management (AUM) to witness 25% annual growth between FY25 and FY27, which will once again be aided by the pricing environment as well as rising consumer demand.

Factoring in the improved loan growth, Muthoot Finance's earnings are also expected to rise 9-13% over FY26-FY27, the note added.

In addition to loan growth and AUM growth, Jefferies expects net interest margins (NIMs) to expand due to stabilising borrowing costs. Credit costs, too, are expected to dilute from FY25 highs, thus putting Muthoot Finance in an excellent position heading into the second half of the financial year ending March 2026.

Jefferies further expects the gold lender's earnings per share (EPS) to grow 34% annually, while return on equity could average around 24%.

Currently trading at a relative strength index of 39, which suggests neutral market sentiment, Muthoot Finance shares have risen as much as 69% over a 12-month period, almost mirroring the gold price momentum.