Muthoot Finance slips 10% despite earnings beat; brokerages see further upside

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of Muthoot Finance fell about 10% in early trade after the company reported its December quarter results, even as brokerages reiterated their positive stance, citing earnings beat and operating leverage.

The company had earlier reported record loan assets under management (AUM) and profit for the nine months ended December 31, 2025. Consolidated AUM stood at ₹1,64,720 crore, up 48% year-on-year, while consolidated profit after tax (PAT) rose 84% year-on-year to ₹7,209 crore.

Jefferies maintains ‘Buy’, TP ₹4,750

Jefferies maintained a “Buy” rating with a target price of ₹4,750.

The brokerage said third-quarter PAT rose 98% year-on-year to ₹27 billion, ahead of its ₹23 billion estimate, led by interest income write-backs. Standalone AUM grew 51% year-on-year but missed estimates due to lower loan-to-value (LTV) ratios and a quarter-on-quarter dip in gold tonnage.

Core net interest margins (NIMs) declined sequentially. However, operating expenses as a percentage of AUM and credit costs came in better than expected.

Jefferies said strong gold prices, an LTV buffer and easing of branch expansion norms should support healthy AUM growth. It expects steady NIMs, lower operating expenses-to-AUM and lower credit costs to drive a 17% earnings per share compound annual growth rate over FY26–28 estimates and return on equity of over 25%.

CLSA retains ‘Outperform’, TP ₹4,600

CLSA retained an “Outperform” rating with a target price of ₹4,600, citing broad-based earnings strength.

The brokerage said net interest income (NII), pre-provision operating profit (PPOP) and PAT beat its estimates by 6%–8%. Loan growth came in at 11% quarter-on-quarter and 51% year-on-year, about 2 percentage points above its estimate.

CLSA said calculated loan yields expanded sequentially despite a higher base, driven by continued interest recoveries, which also supported the earnings beat. As a result, topline grew 13% quarter-on-quarter.

It noted that the company’s business model has inherent operating leverage due to large fixed costs. Total operating expenses, adjusted for a ₹480 million one-off labour code impact, were flat sequentially.

However, CLSA flagged a 2% sequential decline in gold tonnage and a slowdown in customer acquisitions as the only negatives for the quarter.

Overall, brokerages highlighted strong profitability, operating leverage and supportive gold prices as key positives, while keeping an eye on trends in tonnage and incremental customer additions.