ICICI Securities Recommends This Finance Stock To 'Buy' For Good Returns

Target Price

The Current Market Price (CMP) of Muthoot Finance is Rs. 1661. the brokerage firms stated a Target Price for the stock at Rs. 1920, indicating a 16%, with a Target Period of 12 months (1 year).

Company performance

Muthoot Finance has experienced a Steady operational performance. The company's NII went up by 14.5% YoY to Rs. 1813 crore, NIMs increased 53 bps QoQ to 13.46%. their total gold loan AUM hiked 18% YoY and 5% QoQ to Rs. 54682 crore. On the other hand, Stage-3 assets increased 63 bps QoQ to 1.85%. Muthoot Finance's pick-up in AUM growth has been significant.

Comments by ICICI Securities

According to ICICI Securities, "Muthoot Finance's share price has grown by ~4.7x over the past five years. We believe this is a good opportunity to play on the gold finance theme. We maintain our BUY rating on the stock." commenting on the Target Price and Valuation, the brokerage firm states, "We value the core business (gold loan) at ~3.5x FY23E ABV and assign, 41 to subsidiaries to arrive at a target price of Rs. 1920 per share."

The firm added, "Focus on customer addition and market expansion to aid AUM growth. Stable credit cost leading to healthier RoA, RoE at +5%, +25%, respectively. Strong asset quality, low leverage, positive ALMs and with sticky customer, base levers to aid strong operating performance."

About the company

ICICI Securities said, "Muthoot Finance is a leading gold financier in India with overall AUM of Rs. 60,918 crore as on September 2021, of which ~90% comes from gold loans." The company's PAT (in line) has increased by 11% YoY and 2% QoQ to Rs. 9.94 b. Since the pandemic, the hike in gold rates has impacted the company's business positively.

Disclaimer

The above stock has been picked from the brokerage report of ICICI Securities. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.