Muthoot Finance tanks 8% post Q1 earnings. Should you buy the stock?

economictimes.indiatimes.com:

Muthoot Finance shares fell over 8% to the day's low of Rs 1,236.55 on the NSE on Monday following a downgrade by domestic brokerage Nuvama, which recommended a 'Reduce' on the stock, citing expensive valuations, while Motilal Oswal took a 'Neutral' stance estimating limited upside catalysts to push the prices further up. The views came post the June quarter earnings, where the gold financing company registered a 27% year-on-year (YoY) growth in its consolidated net profit at Rs 1,045 crore. The standalone profit after tax (PAT) was reported at Rs 975 crore, up 22% YoY.

In its filing to the exchanges, the company posted an all-time high interest collection in the April-June quarter at Rs 2,863 crore on the back of its best-ever gold loan portfolio growth at Rs 4,164 crore.Muthoot Finance's consolidated loan asset under management (AUM) increased 21% YoY at Rs 76,799 crore in Q1, with the highest-ever quarterly gold loan disbursement at Rs 53,612 crore. Here is what Nuvama and Motilal Oswal recommended:Nuvama: Reduce | Target: Rs 1,200Nuvama downgraded the stock to 'Reduce' from 'Hold' while putting the price target of Rs 1,200. The brokerage firm finds the Muthoot Finance stock expensive and currently trading at 1.9X BV FY25E.

«We are raising EPS by 7% for FY24E/12% for FY25E,» it said. On June quarter earnings, Nuvama said that the PAT was in line with its estimates, while there was a miss on asset quality. The company posted higher-than-expected non-performing loans (NPLs), which led to pressure on its net interest margins (NIMs) and higher credit cost.