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On Thursday, CLSA analysts maintained their Outperform rating on Muthoot Finance Ltd (NSE:MUTT) (MUTH:IN) with a steadfast price target of INR2,470.00. The firm’s fourth-quarter pre-provision operating profit (PPOP) fell short of CLSA’s projections by 3%, attributed to increased operational expenses. However, a slightly better net interest income (NII) coupled with lower credit costs resulted in a net profit that met expectations.
Muthoot Finance reported a robust 41% year-over-year growth in standalone assets under management (AUM) for the fiscal year 2025, following a 20% expansion in the previous fiscal year. This growth is supported by a significant increase in the average ticket size and a healthy compound annual growth rate (CAGR) in customer and loan accounts, which stood at 15% and 9%/12% respectively over the past two years.
The management of Muthoot Finance has set a target for 15% loan growth in the fiscal year 2026, noting that fluctuations in gold prices will play a crucial role in achieving this goal. They also addressed the draft guidelines for gold financing, expressing concerns over the disparate loan-to-value (LTV) rules for banks and non-banking financial companies (NBFCs) in the income-generating segment. The company has submitted its feedback on this matter.
Trading at 2.2 times the projected book value for the fiscal year 2027, Muthoot Finance is expected by CLSA to maintain a return on equity (ROE) of 20%-21% over the next three years. This outlook underpins the research firm’s decision to reiterate their Outperform rating and price target of INR2,470.00 for the company’s stock.
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