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Muthoot Finance shares dropped 7% on the National Stock Exchange (NSE) Friday, following the announcement of lower-than-expected Q2 net profit. The net profit stood at ₹991 crore ($13.3 billion), a year-on-year increase of 14.3%, however, the finance costs were higher than anticipated, leading to the decline in share value.
Despite this setback, Muthoot Finance reported record growth for H1 FY24. The company’s loan assets and gold assets increased by ₹11,771 crore (21% YoY) and ₹11,016 crore (20% YoY), respectively. The Net Interest Income (NII) also rose by 18.2% to ₹1,858.4 crore.
The company’s gross Non-Performing Assets (NPAs) decreased to ₹2,763.9 crore in Q2 from ₹2,878.9 crore in Q1, a drop from 4.26% to 4.01%. Meanwhile, the consolidated loan assets under management saw an increase of ₹2,694 crore or 4% quarter-over-quarter in Q2 and by 24% YoY to ₹79,493 crore in H1 FY24.
Motilal Oswal maintained a Neutral rating on Muthoot Finance with a target price of ₹1270 due to muted gold loan growth and margin moderation. The firm also lowered its FY24/FY25 Earnings Per Share (EPS) estimates by approximately 5% each due to lower Net Interest Margin (NIM).
Despite trading 4.5% lower at 10:59 a.m. IST, Muthoot’s shares have seen over 14% Year-to-Date (YTD) growth and over 17% growth in the last six months. The stock has an average target price of ₹1,362 (an 8% upside), a ‘Hold’ consensus from 17 analysts, and a bullish trend indicated by a Relative Strength Index (RSI) of 57.4 and Moving Average Convergence Divergence (MACD) of 14.5.
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