Muthoot Finance Logs Worst Day Since March 2020 On Q1 Miss
The sharp decline in share price comes after Muthoot Finance's net income missed analyst estimates for the June quarter.
Shares of Muthoot Finance Ltd. tumbled 15% in intraday trade before closing with 12.41% losses, the most since March 2020, after its first-quarter profit missed estimates.
Trading volume is more than 11 times the 30-day average. Share price fell below the 50-day simple moving average, suggesting potential downward price momentum.
Of the 21 analysts tracking the company, 15 maintain 'buy', four suggest 'hold' and two recommend 'sell', according to Bloomberg data. The 12-month consensus price target implies an upside of 29.7%.
Q1 FY23 Results (Standalone, YoY)
Net income at Rs 802.01 crore vs Rs 971.16 crore
Revenue at Rs 2,509.27 crore vs Rs 2,714.93 crore
Interest income at Rs 2,481.57 crore vs Rs 2,683.71 crore
Since the earnings, at least two analysts have downgraded the stock.
Here's how brokerages view of the company's earnings and growth prospects.
Motilal Oswal
Downgrades the stock to 'neutral' from 'buy' and raised the target to Rs 1,250 from Rs 1,240, an implied upside of 5.27%.
Believes that the growth visibility is lacking and cites NIM compression as the reason for Q1 miss.
Sequential decline in gold AUM, elevated advertising costs, aggressive brand campaigns characterised the June quarter, which saw an extension in trade-off between loan growth and margin.
Aggression of banks and gold loan fintechs could leave Muthoot Finance vulnerable as customers can choose banks and gold fintechs as they offer gold loans at relatively lower interest rates.
Cuts FY23/24 estimates by 16%/4% to account for elevated costs and moderation in spreads.
Limited triggers for further upside in the stock as there is a lack of loan growth visibility and structural changes in gold loan NBFC business.
Demand for gold loans is not very buoyant.
Nirmal Bang
Reiterates 'buy' and slashes target to Rs 1,443 from Rs 1,493, still an implied upside of 21.53%.
Weakening trends in core gold loan business and spread compression dragged net income in Q1.
Total customer base fell 1.4% YoY as well as sequentially due to price-led competition by banks .
Reduces full-year growth estimates to account for the sequential decline in Q1.
New customer acquisition is a key monitorable for the company in the upcoming quarters.
Prabhudas Lilladher
Reiterates 'buy' and maintains target price at Rs 1,431 apiece.
Maintains EPS estimates for FY23 and FY24 on hopes of improvement in yields in the coming quarters as teaser loans are repriced.
Company expects AUM on gold loans to rise in the next two to three quarters and also anticipates vehicle finance business to show marked improvement.