Target: ₹1,948

CMP: ₹1,664.85

Muthoot Finance is in a sweet spot, given robust growth prospects backed by sound fundamentals and sectoral tailwinds. Fundamentals are underscored by proven moats of leadership and higher productivity (AUM per branch at ₹14.50 crore vs ₹8 crore for IIFL Finance and a mere ₹5.6 crore for MGFL), steady-state branch and customer expansion, customer segmentation with limited share of 27 per cent in the above ₹3,00,000 ticket size which faces rising competition and increased thrust on marketing & digital initiatives along with enhanced customer service to strengthen Muthoot’s competitive positioning.

We believe high productivity and staunch distribution network can add about 3 per cent to AUM growth annual basis.

Sectoral tailwinds, such as continued momentum in underlaying asset value like gold, concerns regarding unsecured, systemic credit expansion fuelling MSME credit via gold loans, less competition from banks with unit economics turning unfavourable amid tight liquidity will enable MUTH to reclaim its market positioning. We revise 14 per cent growth to 15 per cent + during FY24-26.

Muthoot is poised to reclaim strong market positioning in the gold finance space. Continued rise in gold prices and tight liquidity scenario for banks are leading to healthy business traction.