Feb'25 View on Muthoot Finance Ltd

Muthoot Finance is NBFC engaged in the business of providing gold loans. The company predominately operates in Southern India The Stock is still on upward trajectory even after wide spread falling market and now it looks to cross 2,400 level basis following positive data • Co. reported PAT of Rs1360 cr in Q3FY25, up 33% yoy and 5% above our estimates. • Asset under Management (AUM) growth was strong at 37% yoy and 8% qoq. • Net Interest Margin (NIM) was up 6 bps qoq and stood at 11.6%. • Operating expenses growth was moderate at 27% yoy, leading to 16 bps yoy moderation in the cost to-AAUM ratio to 3.1%. • Strong loan growth led the earnings beat at Muthoot Finance. • The company is well-placed to ride the rally in gold prices and replacement demand of microloans, with a low asset quality risk. • The competitive environment is comfortable for now, while we remain watchful. • Valuations (2.6X book and 13X earnings FY26E) are comfortable in light of 21-22% RoE and strong near-term trajectory.