2 Gold Loan Company Stocks To Buy That Can Give Upto 30% Returns

Brokerage firm, Motilal Oswal in its latest report titled 'India Strategy: Braving the storm', has recommended a host of stocks to buy. According to the firm, Manappuram Finance and Muthoot Finance are stocks to buy and can offer good returns to investors.

Buy the stock of Manappuram for 30% returns

The brokerage suggested buying the stock of Manappuram for a price target of Rs 125 on the stock.

Current market price	Target price	Gain%
96	125	30%

The brokerage expects assets under management to decline by 2.5% QoQ and consolidated assets under management to remain flat sequentially. Motilal Oswal has factored in a margin expansion of 60 basis points QoQ and spread expansion of 50 basis points in the consolidated loan book.

"Expect credit costs to decline to ~1.3% in 2QFY23 (v/s 1.7% in 1QFY23)," it has said in its report. According to Motilal Oswal, investors need to watch out for commentaries on demand in gold loans and asset quality in the MFI and Vehicle segments.

Muthoot Finance: Buy for a price target of Rs 1140

Another gold loan stock that the brokerage has recommended is the stock of Muthoot Finance, However, the brokerage is not as bullish and sees an upside potential of 11% on the stock. It has recommended a buy call on the stock, with a price target of Rs 1140.

The brokerage estimate standalone assets under management growth of 2% QoQ, driven by weak gold loan demand and high competition from banks/gold loan fintechs. Interestingly, the brokerage estimate 80bp sequential expansion in margins.

It says that the CIR is expected to moderate to 33% (from the peak of 35% in the previous quarter). "Watch out for commentaries on gold loan demand and margin guidance for FY23," the brokerage report adds.

Consistent earnings the key

Motilal Oswal has said that the preferred ideas are a combination of companies which can benefit from consistent earnings growth, which can address bigger market size with long term growth runway and favorable industry structure as well as some inherent moats and where valuations have corrected meaningfully and offer an attractive risk-reward equation. These are good valuation parameters to have for long-term investors.

 

Disclaimer

The stocks have been picked from the brokerage report of Motilal Oswal Financial Services. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.