Muthoot Finance Slides 6% Following Morgan Stanley Rating Downgrade Post Q1 Results
Muthoot Finance shares experienced a 6 per cent drop during morning trading on 14 August, subsequent to a downgrade by brokerage firm Morgan Stanley. The downgrade was attributed to perceived growth and yield risks due to heightened competition.
As of 1.24 pm, the stock was valued at Rs 1,279.75 on the National Stock Exchange, reflecting a 5.19 per cent decrease from its previous close.
The gold loan financing company disclosed a standalone profit of Rs 975 crore for the first quarter of the current year, marking a 22 per cent growth compared to the same period in the previous year. This information was shared in a filing on 11 August.
Total income during the same period witnessed a year-on-year growth of 21 per cent, amounting to Rs 3,026 crore. The company also gained board approval for a capital infusion of Rs 400 crore into subsidiary Muthoot Money.
Morgan Stanley downgraded the stock from an "equal weight" status to "underweight," setting a target price of Rs 1,050 per share.
The brokerage stated, "The gold price rise has driven Muthoot's loan book growth this time around, stock now appears to be consolidating. Structural risks to gold loan growth and yields from competition remain."
The estimated consolidated net interest margin (NIM) for FY24-26 was revised down from 12.3 per cent to 11.7 per cent. Additionally, the standalone FY24 earnings per share (EPS) saw a reduction of 3.6 per cent, followed by cuts of 5.9 per cent for FY25 and 6.6 per cent for FY26, according to the brokerage firm.
Motilal Oswal maintained a "neutral" stance with a target price of Rs 1,290.
George Jacob Muthoot, Chairman of Muthoot Group, highlighted that Muthoot Finance continued to deliver robust performance, achieving a consolidated loan asset under management (AUM) of Rs 76,799 crore, a growth of 21 percent year on year. Consolidated profit after tax exhibited a 27 per cent YoY increase, reaching Rs 1,045 crore.
He noted, "We achieved the highest ever consolidated loan assets growth in any Q1 of Rs 5,302 crore. Our subsidiaries Muthoot Homefin and Belstar Microfinance continue to report strong disbursements, contributing 12 percent to the overall consolidated loan AUM."
Muthoot Finance stock has yielded a return of 29 percent over the last six months, outperforming the benchmark Nifty, which gained 7.83 percent during the same period.
