Buy Muthoot Finance; target of Rs 1900: Motilal Oswal

Motilal Oswal is bullish on Muthoot Finance recommended buy rating on the stock with a target price of Rs 1900 in its research report dated November 08, 2021.

500bps growth outperformance over FY21-24E as compared to 250bps earlier). We roll over valuations to Sepemtember-23E and increase target multiples for most of the companies in our coverage universe. We remain broadly constructive across the sector and ahead of consensus on growth/EPS; our preferred picks are Infosys, HCLT, Mphasis and Zensar.”” title=”HDFC Securities research report’s outlook and valuations:  “The YTD EPS upgrades (consensus) have been led by mid-tiers such as Tata Elxis, Mindtree, Mastek, and Persistent Systems, ranging from 20-40 percent and, within tier 1, by Wipro (~15%). We expect the sector (coverage universe) to post 13 percent and 14.5 percent USD revenue/APAT CAGR over FY21-24E compared to 6.5/7.5 percent over the past five years. The mid-tier valuation premium relative to tier 1s may sustain, based on its relative outperformance (>500bps growth outperformance over FY21-24E as compared to 250bps earlier). We roll over valuations to Sepemtember-23E and increase target multiples for most of the companies in our coverage universe. We remain broadly constructive across the sector and ahead of consensus on growth/EPS; our preferred picks are Infosys, HCLT, Mphasis and Zensar.”” width=”100%” height=”auto” >

HDFC Securities research report’s outlook and valuations:  “The YTD EPS upgrades (consensus) have been led by mid-tiers such as Tata Elxis, Mindtree, Mastek, and Persistent Systems, ranging from 20-40 percent and, within tier 1, by Wipro (~15%). We expect the sector (coverage universe) to post 13 percent and 14.5 percent USD revenue/APAT CAGR over FY21-24E compared to 6.5/7.5 percent over the past five years. The mid-tier valuation premium relative to tier 1s may sustain, based on its relative outperformance (>500bps growth outperformance over FY21-24E as compared to 250bps earlier). We roll over valuations to Sepemtember-23E and increase target multiples for most of the companies in our coverage universe. We remain broadly constructive across the sector and ahead of consensus on growth/EPS; our preferred picks are Infosys, HCLT, Mphasis and Zensar.”

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var titStr=”;var editw=”; var typevar=”; var pparr= new Array(‘Monitoring your investments regularly is important.’,’Add your transaction details to monitor your stock`s performance.’,’You can also track your Transaction History and Capital Gains.’); var phead =’Why add to Portfolio?’; if(secglbVar ==1) { var stkdtxt=’this stock’; var fltxt=’ it ‘; typevar =’Stock ‘; if(lastRsrs.length>1){ stkdtxt=’these stocks’; typevar =’Stocks ‘;fltxt=’ them ‘; } } //var popretStr =lvPOPRHS(phead,pparr); //$ (‘#poprhsAdd’).html(popretStr); //$ (‘.btmbgnwr’).show(); var tickTxt =’‘; if(typparam1==1) { var modalContent = ‘Watchlist has been updated successfully.’; var modalStatus = ‘success’; //if error, use ‘error’ $ (‘.mc-modal-content’).text(modalContent); $ (‘.mc-modal-wrap’).css(‘display’,’flex’); $ (‘.mc-modal’).addClass(modalStatus); //var existsFlag=$ .inArray(‘added’,newappndStr[1]); //$ (‘#toptitleTXT’).html(tickTxt+typevar+’ to your watchlist’); //if(existsFlag == -1) //{ // if(lastRsrs.length > 1) // $ (‘#toptitleTXT’).html(tickTxt+typevar+’already exist in your watchlist’); // else // $ (‘#toptitleTXT’).html(tickTxt+typevar+’already exists in your watchlist’); // //} } //$ (‘.accdiv’).html(”); //$ (‘.accdiv’).html(appndStr); } }, //complete:function(d){ // if(typparam1==1) // { // watchlist_popup(‘open’); // } //} }); }); } else { var disNam =’stock’; if($ (‘#impact_option’).html()==’STOCKS’) disNam =’stock’; if($ (‘#impact_option’).html()==’MUTUAL FUNDS’) disNam =’mutual fund’; if($ (‘#impact_option’).html()==’COMMODITIES’) disNam =’commodity’; alert(‘Please select at least one ‘+disNam); } } else { AFTERLOGINCALLBACK = ‘overlayPopup(‘+e+’, ‘+t+’, ‘+n+’)’; commonPopRHS(); /*work_div = 1; typparam = t; typparam1 = n; check_login_pop(1)*/ } } function pcSavePort(param,call_pg,dispId) { var adtxt=”; if(readCookie(‘nnmc’)){ if(call_pg == “2”) { pass_sec = 2; } else { pass_sec = 1; } var url = ‘//www.moneycontrol.com/mccode/common/saveWatchlist.php’; $ .ajax({url:url, type:”POST”, //data:{q_f:3,wSec:1,dispid:$ (‘input[name=sc_dispid_port]’).val()}, data:{q_f:3,wSec:pass_sec,dispid:dispId}, dataType:”json”, success:function(d) { //var accStr= ”; //$ .each(d.ac,function(i,v) //{ // accStr+=”+v.nm+”; //}); $ .each(d.data,function(i,v) { if(v.flg == ‘0’) { var modalContent = ‘Scheme added to your portfolio.’; var modalStatus = ‘success’; //if error, use ‘error’ $ (‘.mc-modal-content’).text(modalContent); $ (‘.mc-modal-wrap’).css(‘display’,’flex’); $ (‘.mc-modal’).addClass(modalStatus); //$ (‘#acc_sel_port’).html(accStr); //$ (‘#mcpcp_addportfolio .form_field, .form_btn’).removeClass(‘disabled’); //$ (‘#mcpcp_addportfolio .form_field input, .form_field select, .form_btn input’).attr(‘disabled’, false); // //if(call_pg == “2”) //{ // adtxt =’ Scheme added to your portfolio We recommend you add transactional details to evaluate your investment better. x‘; //} //else //{ // adtxt =’ Stock added to your portfolio We recommend you add transactional details to evaluate your investment better. x‘; //} //$ (‘#mcpcp_addprof_info’).css(‘background-color’,’#eeffc8′); //$ (‘#mcpcp_addprof_info’).html(adtxt); //$ (‘#mcpcp_addprof_info’).show(); glbbid=v.id; } }); } }); } else { AFTERLOGINCALLBACK = ‘pcSavePort(‘+param+’, ‘+call_pg+’, ‘+dispId+’)’; commonPopRHS(); /*work_div = 1; typparam = t; typparam1 = n; check_login_pop(1)*/ } } function commonPopRHS(e) { /*var t = ($ (window).height() – $ (“#” + e).height()) / 2 + $ (window).scrollTop(); var n = ($ (window).width() – $ (“#” + e).width()) / 2 + $ (window).scrollLeft(); $ (“#” + e).css({ position: “absolute”, top: t, left: n }); $ (“#lightbox_cb,#” + e).fadeIn(300); $ (“#lightbox_cb”).remove(); $ (“body”).append(”); $ (“#lightbox_cb”).css({ filter: “alpha(opacity=80)” }).fadeIn()*/ $ (“#myframe”).attr(‘src’,’https://accounts.moneycontrol.com/mclogin/?d=2′); $ (“#LoginModal”).modal(); } function overlay(n) { document.getElementById(‘back’).style.width = document.body.clientWidth + “px”; document.getElementById(‘back’).style.height = document.body.clientHeight +”px”; document.getElementById(‘back’).style.display = ‘block’; jQuery.fn.center = function () { this.css(“position”,”absolute”); 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Motilal Oswal’s research report on Muthoot Finance

PAT (in line) grew by 11% YoY and 2% QoQ to INR9.94b. Despite higher-than-estimated provisions, lower-than-estimated interest expenses (driven by lower CoB), and benefits of lower operating expenses led to an in line performance. It posted an OPEX beat of 6% – OPEX declined by 2% YoY, but grew 10% QoQ to INR4.4b. The cost ratio declined by 80bp YoY to 3.3%. PPOP (3% beat) grew by 17% YoY and 6% QoQ to INR14.14b. Gross Stage 3 increased by 63bp QoQ to 1.85% in 2QFY22.

Outlook

We expect MUTH to deliver standalone AUM growth of ~17%/14% in FY22E/FY23E. RoA/RoE is likely to remain robust (6%/23%) over the medium term. We cut our FY22E/FY23E EPS estimate by ~2%/1% to factor in slightly higher credit costs. We reiterate our BUY rating with a TP of INR1,900/share (3.1x Sep’23E BVPS).

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