On Thursday, August 14, shares of gold loan financing company Muthoot Finance Limited surged 10% in early trade, reaching a record price of ₹2,760.8.
The sharp rise came after strong June quarter results, prompting brokerage firm Morgan Stanley to upgrade the stock rating from “Equalweight” to “Overweight”.
Morgan Stanley also increased its price target from ₹2,880 to ₹2,920 — a 16% upside from Wednesday’s closing price. Due to this strong rally, the stock is currently in the upper circuit.
Key Reasons for the Upgrade
Morgan Stanley highlighted three main factors for its positive outlook:
Strong Performance – Leading Return on Equity (RoE) and robust earnings per share (EPS) growth.
Positive Forecasts – Consistently better estimates compared to competitors.
Low Asset Quality Risk – Minimal risk of bad loans, despite a possible slight rise in defaults.
Other brokerages have also responded positively:
Jefferies raised its price target from ₹2,660 to ₹2,950 (over 17% potential gain).
It expects higher gold prices and an increase in loan-to-value (LTV) ratio to drive growth, keeping the stock a defensive choice in current market conditions.
Motilal Oswal maintained a “Neutral” rating with a target of ₹2,790 (11% potential gain), noting that while growth prospects remain strong due to the gold loan environment, much of the optimism is already reflected in the stock price.
Strong June Quarter Results
Muthoot Finance’s June quarter performance exceeded expectations:
Total Assets Under Management (AUM): ₹1.2 lakh crore, up 42% year-on-year.
Gold Loan AUM: ₹1.13 lakh crore, up 40% year-on-year.
Asset Quality: Gross Stage 3 assets fell from 3.41% to 2.58%, and Net Stage 3 assets fell from 2.79% to 2.1%.
The company’s board has also approved:
Equity infusion of up to ₹500 crore in Muthoot Money (4% of total AUM).
Equity infusion of up to ₹200 crore in Muthoot Homefin (2% of total AUM).
Out of 25 analysts tracking Muthoot Finance, 15 recommend buying, 6 suggest holding, and 4 advise selling the stock.
