Muthoot Fin (Buy)

CMP: ₹191.55

Target: ₹250

Muthoot’s loan growth remains on track (loan book up 4 per cent q-o-q) as its marketing efforts yielded results. However, the company has reduced lending rates ahead of base rate reduction by banks leading to pressure on NIM.

Muthoot Finance (Muthoot) reported PAT of ₹183 crore, up 2 per cent y-o-y and 11 per cent q-o-q. Muthoot reported negligible NPL throughout the transition, demonstrating the virtue of its risk management systems. With a low base (y-o-y decline in last two years), we find limited impact as compared to the previous down-cycle. Muthoot’s concerted efforts to market its products to the middle class will reduce the impact, in our view. While volatile gold prices could hamper near-term growth trajectory, innovative product marketing and gradual decline in lending will help offset this.