Muthoot Finance, Manappuram valuations turn attractive; rising gold prices add to tailwinds, says ICICI Securities
Muthoot Finance, Manappuram Finance, and IIFL Finance. With both Muthoot and Manappuram Finance maintaining their FY24 guidance for substantial gold AUM growth of 15% and 10%, the recent ascent in gold prices further acts as a tailwind. “Apart from stable competitive and pricing environment, the recent ascent in gold prices (5%/1% in FY24TD/ Q4FY24TD) bodes well for Muthoot and Manappuram’s AUM.
Both enjoy a strong correlation between gold loan price and AUM; which should help attain higher AUM growth. Gold loan demand may also find further support amid some pressure observed in unsecured lending," ICICI Securities said in a report. Also Read: IIFL Finance stock recovers ground with 10% jump after significant 2-day slump The brokerage firm has upgraded its rating on Muthoot Finance to ‘Buy’ from ‘Add’ earlier with an unchanged target price of ₹1,605 per share.
It has maintained a ‘Buy’ rating on Manappuram Finance and raised the target price to ₹220 per share from ₹190 earlier. However, it sees possible resurfacing of competitive intensity pressuring growth or net interest margins (NIM) as a key risk in gold while worsening asset quality is the risk in the non-gold segment. Muthoot Finance’s key business drivers ahead include managing NIMs against rising Cost of Funds (CoF) and growing tonnage/new clients; driving full benefit of branch expansions; growth in non-gold loan business and managing asset quality in non-gold, especially MFI business, ICICI Securities said.
It factors in gold AUM growth of 14% in FY24 and FY25 each and 13% in FY26 with yields of ~18%. Its target price is based on 1.9x FY26E P/B for the standalone business, 1.2x FY26E P/B for Belstar (MFI subsidiary), and 1x for others. Also Read: RBI on IIFL
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