MOSL: MUTHOOT FINANCE (Neutral)-AUM growth strong but asset quality disappoints
Muthoot Finance: AUM growth strong but asset quality disappoints
(MUTH IN, Mkt Cap USD3.1b, CMP INR547, TP INR560, 2% Upside, Neutral)
- Muthoot Finance's (MUTH) 4QFY19 PAT grew 1% YoY to INR5.1b (2% beat). The quarter was characterized by a pick-up in gold loan AUM growth offset by higher delinquencies.
- Standalone AUM increased 5% QoQ/18% YoY to INR342b - the highest YoY growth in the past 25+ quarters. Growth was driven by both volume and value - gold stock holdings were up 9% YoY to 169 tonnes. Note that MUTH opened 155 gold loan branches in FY19.
- Yields (calc.) improved 130bp QoQ to 22.5%, driven by stronger collections, while cost of funds was largely stable at 9.5%. We do not foresee any further increase in cost of funds, as incremental borrowings are also being raised at ~9.5%. Borrowing mix was largely stable, except for the rise in the share of CPs from 16% to 18%.
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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