MOSL: MUTHOOT FINANCE (Buy)-AUM and Gold holdings flat QoQ, auctions miniscule
(MUTH IN, Mkt Cap USD8.4b, CMP INR1547, TP INR1825, 18% Upside, Buy)
- PAT grew by ~16% YoY, but fell 2% QoQ to INR9.7b (~9% miss) in 1QFY22. This was driven by a miss on NII (down 4% QoQ due to lower yields) and slightly mitigated by lower opex (down 23% QoQ).
- Core Gold loans continued to exhibit resilience, with the portfolio remaining flat QoQ (up 29% YoY), despite muted Gold loan demand and disruption in branch operations during 1QFY22.
- The deterioration in standalone GS3 was along expected lines at 1.2% (up ~25bp QoQ), but is largely technical in nature. We expect this to get reversed in 2QFY22, with provision write-backs.
- MUTH has reported a decent performance in a difficult quarter and it only goes to show the strength of this franchise. We expect a strong rebound in Gold loan demand over the next six months. Our FY22E/FY23E loan growth is in line with the management guidance of 15%
- On account of a longer than anticipated impact of the second COVID wave, we cut our FY22E/FY23E EPS estimate by 6%/2%. The stock trades at 2.7x FY23E P/BV. We reiterate our BUY rating with a TP of INR1,825/share (3.2x FY23E BVPS).
Muthoot Finance Limited is a gold financing company. The Company is a non-banking financial company (NBFC), which is engaged in providing loan (financing) against collateral of gold jewelry. The Company operates through two segments: Financing and Power Generation. The Company provides personal and business loans (secured by gold jewelry) primarily to individuals having no access to formal credit for a reasonable tenure to meet their short-term working capital requirements. The Company offers gold loans, foreign inward money transfer services, foreign exchange services, insurance broking, home loans, personal loans, collection services, microfinance, wind mill power generation, white label automated teller machine, instant money transfer services and domestic money transfer services. The Company has a network of approximately 4,294 branches all over India. In Sri Lanka, the Company offers corporate loans, mortgage loans, factoring, business loan and short term loans, among others.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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