Muthoot Finance share jumps 10% as analysts raise price targets post Q1 beat

Muthoot Finance Ltd saw its shares hitting their 10 per cent upper circuit limit on Thursday on solid June quarter results, which came in better than peers. Asset under management (AUM) growth was strong due to firm gold prices and net interest margin (NIM) was higher, said analysts as they raised target prices on the stock post Q1 earnings.

After incorporating the better than expected performance of 1QFY26, Nirmal Bang upgraded its rating on Muthoot Finance from a ‘Hold’ to a ‘Buy’ with a revised target price of Rs 2,885 against Rs 2,724 earlier. The brokerage said its target multiple for the standalone Muthoot Finance business is at a 13.4 per cent premium to the past 5-year average price to adjusted book value (ABV) multiple of 2.64 times.

“We have been positive on Muthoot Finance because of its strong customer acquisition & retention measures, entry into new geographies & segments and its ability to grow through strong internal accruals (CAR at 22%),” it said.
   
With strong earnings that are substantially better than peers, Nuvama reiterated ‘Buy’ on the stock. It increased its target price on the stock to Rs 2,993 apiece from Rs 2,625 earlier. Muthoot Finance is confident about maintaining yield and growth, it noted. 

India’s largest gold financing company in terms of loan portfolio, registered profit after tax of Rs 2,406 crore in the June quarter, up 90 per cent YoY over Rs 1,079 crore in the corresponding quarter last year. 

Loan AUM stood at Rs 1,20,031 crore in the June quarter compared with Rs 84,324 crores in the year-ago quarter, up 42 per cent YoY. Loan assets increased Rs 11,383 crore, registering a growth of 10 per cent. Gold Loan assets jumped Rs 32,272 crore, registering a growth of 40 per cent YoY.

MOFSL said Muthoot Finance has benefited from the tailwinds of a sharp rise in gold prices and an improvement in gold loan demand due to the industry-wide rationing in unsecured credit. 

The domestic brokerage said Muthoot Finance is one of the best franchises for gold loans in the country, as is evident from its ability to deliver industry-leading gold loan growth and best-in-class profitability. 

“However, we believe that its valuations are rich for the deep cyclicality in its gold loan growth, which will remain vulnerable to any volatility in gold prices. We reiterate our Neutral rating with an unchanged target of Rs 2,790 (based on 2.7x Mar’27E P/BV),” it said.