MOSL: MUTHOOT FINANCE (Neutral)-Strong performance on growth; yields higher
MUTHOOT FINANCE: Strong performance on growth; yields higher
(MUTH IN, Mkt Cap USD4.2b, CMP INR747, TP INR800, 7% Upside, Neutral)
- PAT increased 66% YoY to INR8.03b (26% beat) in 3QFY20. The quarter was driven by strong AUM growth (backed by large debt capital raise) and a yield improvement (largely driven by higher penal interest).
- AUM grew 7% QoQ/19% YoY (best growth in several quarters) to INR385b. Yields increased 100bp QoQ/370bp YoY to 24.9% – the highest in the past 11 quarters. We raise our estimates by 6-10%. Maintain Neutral with a target price of INR800.
Gold loan book growth robust; Spreads improve
- Gold loan book was up 19% YoY/8% QoQ at INR 377b – the strong sequential growth was driven by high pent up demand from 2QFY20.
- Yields improved by ~100bp QoQ to 24.9%, whereas CoF declined 40bp QoQ to 9.1%. The company raised ECBs (at 6.12% pre-hedging) of USD450m.
- GS 3% declined 90bp QoQ to 2.54%. Credit costs (on AUM) in 3QFY20 elevated to 69bp from 30bp in 2QFY20 due to provisions against a burglary.
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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