Muthoot Finance shares fall as brokerages look unimpressed despite strong Q3 results; what should you do?

Muthoot Finance share price: Shares of Muthoot Finance, the country's largest gold loan non-banking financial company (NBFC), were trading in negative territory on Thursday, February 15, despite the company reporting strong Q3 results on Wednesday. The gold loan provider's stock settled at Rs 1,379.80 apiece yesterday, February 14, on the BSE.

At the time of publishing this news, Muthoot Finance stock traded 2.78 per cent or Rs 38.40, lower at Rs 1,341.40 on the BSE. Shares of Muthoot Finance last traded at Rs 1,341.85 each, down 2.75 per cent on the BSE today.

Muthoot Finance Q3 results

The company reported a 22.5 per cent rise in consolidated net profit to Rs 1,145 crore for the December quarter (Q3 FY24) as compared to Rs 934 crore logged in the corresponding quarter of the previous fiscal.

Its total income during the quarter of the ongoing fiscal increased by 27 per cent to Rs 3,820.02 crore from Rs 3009.59 crore registered in Q3 FY23.

Muthoot Finance's interest during the quarter increased to Rs 3,683 crore as compared to Rs 3,010 crore a year ago.

Here's what management said

George Jacob Muthoot, chairman of the Muthoot Group, said, "We are glad to announce that our consolidated loan assets under management crossed the milestone of Rs 80,000 crore and our standalone loan assets under management crossed the milestone of Rs 70,000 crore. India’s favourable demographics, coupled with our policymakers' focus on sustained economic growth, present a huge growth opportunity for us."

"In line with our vision to emerge as a diversified financial business, we are consciously pivoting our efforts towards growing our non-gold loan book while maintaining our position as a frontrunner in the gold loan industry. We aim to capitalise on the strong growth opportunity in affordable housing, microfinance, personal loans, and vehicle finance and grow the share of subsidiaries to 18 per cent-20 per cent in the next 5 years," the chairman added.

Should you buy or sell the stock?

CLSA has maintained a 'reduce' call and increased the target to Rs 1,440 from Rs 1,350 earlier. The brokerage noted that the company's tonnage growth remains muted but spreads improve a bit.

On the other hand, Morgan Stanley has maintained an 'underweight' call on the stock and set the target at Rs 1,165. According to the brokerage, the company's pre-provision operating profit (PPOP) was in line in Q3; however, the credit costs led to a PAT beat. AUM growth was largely in line; gold loans grew 2.5 per cent QoQ, and gross stage 2 and 3 ratios improved QoQ.