Muthoot Finance Ltd. share price target

Growth trajectory healthy; confident of beating AUM growth guidance in FY21 Despite increasing competition from banks, MUTH has witnessed robust growth in the past few months. Given the short duration as well as low ticket size of the product, the absolute interest cost in INR terms to the borrower does not increase much with higher yield; hence, players such as MUTH are able to compete with banks that offer much lower interest rates. The management further clarified growth comes regardless of gold prices in times of decline in gold prices, borrowers pledge more gold and vice-versa. Hence, despite the stated guidance of 15% YoY loan growth, management is confident...

MUTH at point of inflection ................................................................................. 5 AUM to clock 19% CAGR over FY21-23 ............................................................ 7 Pricing power to be maintained; long terms NIMs stable ................................. 14 Cost efficiencies to drive RoAs......................................................................... 18 Superior asset quality; subsidiaries closely watched ........................................ 21 Subsidiaries' asset quality a key monitorable: ........................................... 25 Robust Risk matrix and collection infra across business segments .............. 26 MUTH's high return controlled risk model ........................................................ 27...

Muthoot Finance (MUTH) reported robust growth in gold AUM at 32% YoY vs 16% YoY (Q1FY21); however profitability growth was lower at 4% YoY due to higher tax rate and decline in NIMs. NII grew by 10% YoY led by decline in margins; while PPoP grew by 13% YoY led by higher other income (up 123% YoY). Provisions declined as asset quality improved in gold loan portfolio due to interest collection and refinancing at higher gold prices. Stage III loan assets declined by 130bps QoQ to 1.26%, however NPA is never a cause of concern in gold loan. We believe that MUTH with ~89% of AUM in the Gold loan portfolio has lower risk of loss of assets versus other NBFCs. We introduce FY23...

Muthoot Finance's (MUTH) 2QFY21 PAT increased 4% YoY to INR8.9b (4% beat). The quarter was characterized by best sequential loan growth of 14% (since FY12), stable spreads and sharp improvement in asset quality. With...

19 August 2020 Muthoot Finances (MUTH) 1QFY21 PAT increased ~60% YoY to INR8.4b (2% miss). However, according to management, the cost reduction is one-off and unlikely to sustain. As the company opened branches in May20, it witnessed more collections than disbursements. Hence, its loan book declined marginally QoQ. Standalone AUM moderated 1% QoQ to INR413b, driven by stronger collections. However, disbursements picked up toward end-1QFY21 and have sustained in 2QFY21 too. A key factor was the online disbursements (wherein the company is offering cash-backs), which have jumped 4x since the start of the lockdown. Over the past year, the company has enhanced liquidity on its Balance Sheet from INR9b in 1QFY20 to INR85 in 1QFY21. The higher liquidity weighed down on margins as borrowings have grown 38% YoY (v/s 15% YoY growth in the loan book). Management has guided to keep liquidity on the balance sheet at 10%.

IGL: Volume concerns worsen downgrade to SELL. MUTH: All that glitters is gold. HPCL: Marketing advantage in challenging times

Muthoot Finance (MUTH), one of our top picks, reported robust growth in profitability (60% YoY) as well AUM (22% YoY Cons.) in 4QFY20. NII grew by 30% YoY led by improvement in margins; while PBT grew by 38% YoY led by lower provisions (down 76% YoY). Lower provision as asset quality improved as well as management expects no further requirement of provisions for Covid -19 due to gold loan business model. Stage III loan assets declined by 38bps QoQ to 2.16%, however NPA is never a cause of concern in gold loan. We revise estimate upwards to 10% AUM growth for FY21 vs 5% YoY earlier as management remains confident of 15% gold loan growth in FY21. This...

Muthoot Finance's (MUTH) gold AUM increased 22% YoY to Rs 416bn in Q4FY20 due to robust gold loan demand.

17 June 2020 Muthoot Finances (MUTH) 4QFY20 PAT surged 59% YoY to INR8.2b (in- line), driven by strong AUM growth and improvement in asset quality. In FY20, MUTH delivered growth of 22%/34%/53% for loans/PPoP/PAT. RoA/RoE for the year stood at 6.8%/29%. However, given the uncertain outlook for MUTHs subsidiaries and the re-rating in the stock, we maintain with TP of INR1,100. spreads were up 200bp YoY due to higher penal interest and lower cost of funds (down 80bp YoY). GS3% declined 40bp QoQ to 2.16%. The company made INR48m provisions during the quarter. Similar to 3QFY20, MUTH raised USD550m via ECBs in the quarter. Opex jumped 17% QoQ due to an accounting treatment on hedging cost for the ECBs raised. Customer footfall at 65-70% of run-rate now. Disbursements declined ~40% QoQ to INR583m.

We delved into the operating metrics of three large gold financiers Muthoot Finance (MUTH), Manappuram Finance (MGFL) and Muthoot Fincorp (MFIN) and found that MUTH has a wider reach and is a better paymaster, aiding higher productivity.