Muthoot Finance Shares Soar 4% on Strong Q4 Results, Brokerages Upbeat on Gold Loan Growth

Shares of Muthoot Finance jumped over 4% to Rs 1,745 each on May 31 after the company posted strong Q4 results, driven by high loan demand and rising gold prices.

CLSA analysts, while maintaining an ‘underperform’ rating, raised their target price for Muthoot Finance to Rs 1,700 per share, citing strong growth prospects.

“The main reason for the Q4 success was strong gold loan growth, outperforming many banks. Management is confident of achieving 15% gold loan growth in FY25,” CLSA analysts noted.

Kotak Institutional Equities also kept an ‘add’ rating on Muthoot Finance with a target price of Rs 1,850 per share. They believe the 15% rise in gold prices in FY24 will help Muthoot achieve high-teen loan growth in FY25.

“We expect an 18% earnings CAGR from FY25-27, driven by a 16% loan book CAGR and margin expansion,” Kotak analysts said.

Muthoot Finance reported a 17% year-on-year increase in standalone net profit to Rs 1,056 crore in Q4FY24, up from Rs 903 crore a year ago. The 22% rise in spot gold prices during January-March boosted loan growth for the company.

The gold financier’s revenue from operations increased 8% to Rs 3,409 crore in Q4FY24, compared to Rs 3,168 crore in Q4FY23. Its interest income grew around 20% year-on-year to Rs 3,358 crore.

This year, Muthoot Finance shares have risen over 14%, outperforming the 4% rise in the Nifty 50 index. The stock hit a 52-week high of Rs 1,761 on May 28, 2024.