Buy Muthoot Finance; target of Rs 3070: ICICI Securities

ICICI Securities's research report on Muthoot Finance

We have backed Muthoot Finance (Muthoot) to exhibit strong execution, which has been a constant feature of the company over the years. While FY26 was aided by high gold prices, a positive demand cycle, and overall favourable regulations, expectations for FY27 remain steadier, but execution so far has been superlative, with H1 AUM advancing INR 2.1trn, a growth of 15.1% from FY26 base. For FY27, guidance is for 25% AUM growth, with sustainable yield/NIM outlook of 18%-18.5% and 10.5%-11%, respectively. There are positives: Muthoot’s strong execution history, potential of the gold loan market, well-managed LTV of the current mix, and continued branch expansion, against the concern of rising competition. We have seen Muthoot manage such cycles in the past.

Outlook

Upgrade to BUY: TP revised to INR 3,070 (INR 3,500 earlier) Our target price is based on 2.1x FY28E P/B (2.4x FY28E P/B) for Muthoot’s standalone business, 1x FY28E P/B (1x FY27E earlier) for home finance,