Muthoot Finance Shares Jump 10% After Strong Q1 Results and Price Target Upgrades
Occasionally, there are moments in the stock market that bring pure excitement for investors. Today was such a day for Muthoot Finance shareholders. Shares of gold loan NBFC Muthoot Finance Shares jumped 10% sharply on Thursday morning and reached ₹2,760.8—a record high. This turmoil is not just the result of a single day but is a result of the strong performance of Q1 and positive upgrades of big brokerages.
Morgan Stanley upgraded the rating of Muthoot Finance from “equal weight” to “overweight” and also raised the price target from ₹2,880 to ₹2,920. This target represents an upside of approximately 16% from Wednesday’s closing price. Three strong reasons were given behind this—group-leading Return on Equity (RoE) and Earnings Per Share (EPS) growth, positive consensus upgrades compared to peers, and negligible asset quality risk.
Brokerages trust Muthoot Finance
Not just Morgan Stanley, Jefferies also raised its target for Muthoot Finance from ₹2,660 to ₹2,950, which represents an upside of approximately 17%. Jefferies says tailwinds in gold prices and the capacity to increase the loan-to-value (LTV) ratio will support healthy loan growth for Muthoot Finance. The brokerage firm estimates the company’s net profit CAGR of 23% and RoE of 21% between FY26 and FY28.
On the other hand, Motilal Oswal has taken a cautious approach and has a “neutral” rating on the stock, with a price target of ₹2,790—implying an upside of 11%. They say the favorable environment of the gold loan sector and availability of limited unsecured credit will sustain the growth of Muthoot Finance, but valuation has already become quite high.
Muthoot Finance Shares Q1 Results Boosted Investor Confidence
The June quarter results were excellent from every angle for Muthoot Finance. The company’s overall Assets Under Management (AUM) grew by 42% from last year to ₹1.2 lakh crore, with gold loan AUM growing by 40% to ₹1.13 lakh crore. Asset quality also saw improvement—gross Stage 3 assets declined from 3.41% to 2.58%, and net Stage 3 assets declined from 2.79% to 2.1%.
The Board has approved an equity infusion of ₹500 crore in Muthoot Money, which is 4% of total AUM. Also, there are plans to invest ₹200 crore in Muthoot Homefin, which is 2% of the company’s overall AUM.
Management’s Aggressive Growth Outlook
Managing Director George Alexander Muthoot told CNBC-TV18 that the company’s current loan growth guidance is 15%, but it can be revised to even higher after Q2. He gave a clear indication that the growth can be even higher than 20%. Behind this confidence are three major factors—healthy demand for gold loans, strong momentum in gold prices, and RBI’s recent lending guidelines, which have proven to be very business-friendly for the industry.
Muthoot says that the RBI and Finance Ministry’s positive stance on the gold loan business sends a clear message to the market that this sector is beneficial for society and responsible lending is being encouraged.
Factors supporting Muthoot Finance Shares
Jefferies says that a strong rally in gold prices and flexibility to increase LTV will make Muthoot Finance’s loan growth sustainable. Morgan Stanley also highlighted the company’s strong RoE, EPS growth, and low asset quality risk. Currently, gold loan borrowers have limited access to unsecured loans, which is naturally pushing the demand.
The NBFC plans to maintain its spread at 9.5% and, just as banks cut their MCLR rates, pass on the benefit of lower borrowing rates to customers. This strategy is not only beneficial for customers but will also help build long-term brand trust.
Investor Sentiment and Future Outlook
Out of 25 analysts who cover Muthoot Finance, 15 have a clear “buy” call, 6 have “hold,” and only 4 have a “sell” rating. This clearly shows that the majority of market experts have a strong belief in the future growth of the stock.
The performance shown by Muthoot Finance Shares in Q1 is not just a quarterly boost but seems to be an indicator of sustainable growth. The favorable macro environment of the gold loan sector, the supportive approach of the RBI, and the company’s efficient capital access strategy together make this stock a strong defensive play.
For now, Muthoot Finance shares are trading at their all-time high, but looking at the analyst upgrades and the bullish stance of the management, it seems that this rally is not going to stop anytime soon. This can be a golden opportunity for long-term investors, but it is important to keep your valuation in mind.
Disclaimer:
This article is for informational purposes only. The views and projections given in it may change according to market conditions. Stock market investments come with risk, so it is important to take advice from your financial advisor before investing.
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