Muthoot Finance valuations attractive as per stock's 'bulls'; check new price targets

Shares of Muthoot Finance

Ltd. will be in focus on Friday, May 15, following its March quarter earnings, after multiple brokerages maintained bullish views on the gold financier.

Brokerage firm Bernstein maintained an ‘Outperform’ rating on the stock with a price target of ₹4,500.

The brokerage said Muthoot Finance delivered a healthy quarter, aided by continued strength in gold prices, which drove assets under management (AUM) growth of 50% year-on-year and supported profitability expansion.

Bernstein highlighted that net interest margins (NIMs) improved further to 20.8% due to higher loan yields, while stable operating expenses and resilient asset quality trends helped earnings growth. Earnings per share more than doubled year-on-year, while return on equity improved to 34%.

The brokerage noted that although Stage 2 and Stage 3 loans increased during the quarter, management clarified that the rise was largely linked to RBI-mandated borrower-level classification changes rather than any major deterioration in asset quality.

Morgan Stanley retained its ‘Overweight’ rating with a target price of ₹4,330, citing a strong profit beat in Q4 despite slightly weaker-than-expected loan growth.

The brokerage raised its FY27 and FY28 earnings estimates by 6% and 4%, respectively, while also increasing NIM assumptions after a stronger-than-expected underlying margin performance during the quarter.

Morgan Stanley said Muthoot Finance’s valuation remains attractive at 11.5 times FY28 estimated earnings and 2.5 times FY28 estimated book value, especially considering its projected return on equity of 24.5% over FY27 and FY28 in a challenging macro environment.

CLSA also maintained an ‘Outperform’ rating, and a target price of ₹4,600. CLSA said Q4 profit exceeded estimates by 30%, primarily driven by stronger net interest income and sharp improvement in loan yields.

The brokerage added that AUM growth of 10-11% sequentially came in slightly ahead of expectations, though it was largely supported by higher loan-to-value (LTV) ratios. However, gold loan tonnage declined 4% sequentially following a 2% decline in the previous quarter.

Despite trimming loan growth estimates due to the recent correction in gold prices, CLSA increased its FY27 profit estimates by 15% on the back of higher yields.

Meanwhile, Jefferies maintained a ‘Buy’ rating on the stock, although it marginally cut its target price to ₹4,350.

Jefferies noted that Q4 profit rose 105% year-on-year to ₹3,080 crore, significantly above estimates, led by stronger net interest income. Standalone AUM grew 50% year-on-year, supported by elevated gold prices and higher LTV levels.

The brokerage, however, pointed out that customer count declined 2% sequentially due to churn in the lower-ticket loan segment. It added that strong gold prices, available LTV headroom and branch expansion should continue supporting growth, driving an estimated 15% EPS CAGR and 25% return on equity over FY26 to FY28.

During the earnings call, management guided for 15% AUM growth and maintained that lending up to 85% LTV does not pose significant risks, with the current portfolio LTV standing at 57%. The company also guided for a return on assets (RoA) of 3.5%.

Among the 25 analysts tracking the stock, 14 currently have a ‘Buy’ rating, while six recommend ‘Hold’ and five have a ‘Sell’ call.

Muthoot Finance shares ended 0.49% higher at ₹3,523.50 on Thursday. The stock has declined 8% so far this year.