Moneycontrol PRO
Check Credit Score
Check Credit Score
HomeNewsBusinessMarkets

Muthoot Finance climbs 15% to new high after healthy earnings growth

Narnolia Research has upgraded the stock to “buy”.

February 17, 2020 / 02:45 PM IST
Muthoot Finance

Muthoot Finance

 
 
live
  • bselive
  • nselive
Volume
Todays L/H
More

Muthoot Finance share price climbed 16 percent to hit a record high of Rs 868.80 on February 17 after the gold- loan company posted healthy earnings in the December quarter that prompted Narnolia Research to upgrade the stock to “buy”.

The stock, which has rallied 65 percent in the last one year, was quoting at Rs 867.25, up Rs 120.65, or 16.16 percent, on the BSE at 1403 hours.

Muthoot reported a healthy 66.05 percent year-on-year increase in Q3FY20 profit at Rs 803.4 crore despite an increase in provisions and 45 percent increase in net interest income at Rs 1,586.9 crore YoY, beating expectations.

Profit was estimated at Rs 648.1 crore and net interest income at Rs 1,297.4 crore, according to a CNBC-TV18 analyst poll.

Gold auctioning continued to support earnings growth for second consecutive quarter. Loan growth at 19 percent YoY was the best in last 17 quarters on the back of strong rural demand.

Net interest margin at 17.1 percent for Q3FY20 was also the highest in 12 quarters, against 16.05 percent in previous quarter and 13.51 percent in the year-ago period.

"Margin is expected to improve as the hike in the interest rate taken in July is resetting into the portfolio. Growth was mainly driven by a strong collection efficiency which has resulted in an improvement in the asset quality. The operating expense is expected to remain inflated going forward as the management has planned to expand branches by 100-200 every year," said Narnolia Research. It valued the stock at 2.3X P/B FY21e at Rs 867 and upgraded to buy.

The brokerage remained optimistic about the stock, saying liquidity crisis has resulted in increased preference for gold loan financing. Though the cost of funds is trending in a higher range but management has been able to pass on the hike in cost, thus maintaining margin. "We increase our estimates for FY21 on the back of strong AUM growth and better margins prospects," it said.

Assets under management grew by 19.1 percent YoY (up 7.8 percent QoQ) to Rs 38,498 crore in the December quarter, with gold AUM growing 17.8 percent YoY (up 8 percent QoQ) at Rs 37,725 crore.

Operating profit for the quarter stood at Rs 1,144.3 crore, rising 51.5 percent YoY (up 6.6 percent QoQ).

Asset quality also improved, with gross non-performing as a percentage of gross advances (NPA) falling 89bps QoQ to 2.54 percent. Net NPA declined 79bps QoQ to 0.68 percent during the quarter.

Provisions for bad loans at Rs 64 crore increased sharply by 538.5 percent YoY and 141.5 percent sequentially.

Moneycontrol News
first published: Feb 17, 2020 02:36 pm

Discover the latest business news, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!

Advisory Alert: It has come to our attention that certain individuals are representing themselves as affiliates of Moneycontrol and soliciting funds on the false promise of assured returns on their investments. We wish to reiterate that Moneycontrol does not solicit funds from investors and neither does it promise any assured returns. In case you are approached by anyone making such claims, please write to us at grievanceofficer@nw18.com or call on 02268882347