On Thursday, August 14, brokerage firm Morgan Stanley upgraded shares of Muthoot Finance Ltd., the gold loan financing company, to "overweight" after June quarter results. The price targets on the company have been raised by other analysts covering the stock. In early trading, the stock jumped 10%.
Morgan Stanley
Morgan Stanley had earlier rating of "equalweight" on the stock. From Rs 2,880, the brokerage raised the price target on Morgan Stanley to Rs 2,920. From Wednesday's closing levels, the revised price target.
Three Key Reasons
Group-leading RoE and growth in its Earnings Per Share(EPS).
Potentially ongoing consensus upgrades contrary to cuts seen among peers
Bad loans are likely to rise, with negligible asset quality risk.
Jefferies
Jefferies raised the price target on Muthoot Finance to Rs 2,950 from Rs 2,660, from Wednesday's close, implying potential upside of over 17%.
According to Jefferies, tailwinds to gold prices, headroom to lift LTV should support Muthoot's healthy loan growth.
Return On Equity
Over the financial year 2026-2028, the brokerage is anticipating a net profit compounded annual growth rate (CAGR) of 23%. Also, the Return on Equity (RoE) of 21%.
Loan Growth Momentum
Motilal Oswal remains "neutral" on Muthoot Finance with a price target of Rs 2,790. It implies a potential upside of 11% from Wednesday's close. The company is well-positioned to maintain its healthy loan growth momentum. The brokerage said that with a favourable outlook for gold loans, driven by the limited availability of unsecured credit.
Assets Under Management
With overall Assets Under Management (AUM) increasing by 42% from last year to Rs 1.2 lakh crore, Muthoot Finance's results were better than expected on all fronts. With Gross Stage 3 assets from 3.41% from 2.58% earlier, asset quality also saw significant improvement from the previous quarter.
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