Muthoot Finance shares tumble 14% despite Q1 profit, brokerages flag margin pressure
The gold loan lender reported a profit after tax of ₹2,550 crore in Q1FY27, compared with ₹2,046 crore in the corresponding quarter
Muthoot Finance experienced a 14.4% decline in shares following its Q1 earnings report, despite a notable 25% increase in profit. Brokerages expressed mixed opinions, with concerns over margin compression overshadowing positive loan growth. Muthoot reported a profit after tax of ₹2,550 crore, up from ₹2,046 crore in the previous quarter. The company recommended the appointment of Alexander George as the Managing Director, effective October 1.
Global brokerage Bernstein rated the stock as "outperform" with a target price of ₹4,500, highlighting healthy gold loan AUM growth while noting a sharp 300 basis points contraction in net interest margin due to yield normalization. CLSA rated Muthoot "outperform" but cut its target price to ₹4,000, citing a 16% shortfall in Q1 profit estimates primarily due to yield compression.
Morgan Stanley maintained an "overweight" rating with a target price of ₹3,705, describing the quarter as decent despite a net interest margin miss. Jefferies downgraded the stock to "hold," cutting its FY27 and FY28 earnings estimates by 7% and 8%, respectively, citing margin compression and competition. Motilal Oswal rated the stock "neutral" with a target price of ₹2,850, noting a weak start to FY27 due to lower gold loan yields and margin moderation.
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