Buy This Gold Loan Stock, Top Stock Broking Firm Sees Upside of Up To 27.05%

Leading brokerage firm Prabhudas Lilladher has given a 'buy' rating on the stock of this non-banking finance company (NBFC), Muthoot Finance. The stock-broking firm sees a potential upside of up to 27.05% from this NBFC that specialises in gold loans. The firm feels that the lender's gold AUM has grown strongly and would continue do to so.

Q4FY23 performance

Muthoot Finance reported a strong growth of 9.5% QoQ in loan book to Rs 632 billion, higher than Prabhudas Lilladher's estimate of Rs 595 billion. It is up by 8.9% YoY as the gold loan business recovered strongly by 8.9% QoQ to Rs 619 billion after 4 consecutive quarters of de-growth.

As per the brokerage research report, the growth in tonnage was also seen (180 tonne from 175 tonne in Q3FY23). The number of active customers increased by 2% at 5.3 million whereas the number of loan accounts grew by 1% QoQ (8.1 million).

While the NFBC's NIMs grew by 40bps to 12.3% from 11.9% in Q3FY23 and the cost of funds reduced by 9bps QoQ and stood at 8.04%.

Valuation and Rating

Gold AUM will continue to see 15% YoY growth in FY24 and FY25 as Muthoot Finance managed to post its highest-ever quarterly gold disbursement of Rs 518.5 billion, suggested Prabhudas Lilladher.

Given the strong gold AUM growth of 8.9% QoQ amidst heavy competition from banks and new-age fintech players, the firm has maintained its 'BUY' rating and target price at Rs 1,315 on (2.2x Sep'24E PABV). Re-rating can happen if the company sustains this growth momentum and shows improvement in asset quality, the firm added.

Share price movement

The current market price of Muthoot Finance is Rs 1,121.00. It has surged by a whopping 8.34% on a single day in the trade, on an intraday basis. In the last one year, the stock price has fallen by just 1.83% while in the last three years, it has surged by 35.64%.

Disclaimer

The stock has been picked up from the brokerage reports of Prabhudas Lilladher. Greynium Information Technologies, the author or the brokerage firm will not be liable for any losses caused as a result of decisions based on the write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.