Muthoot Finance shares hit 52-week high, trade near brokerages’ target price; should you buy stock?

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Published: February 18, 2020 12:53:40 PM

Since Q3 earnings, Muthoot Finance shares have surged over 20 per cent. Following the quarterly results, at least two brokerage and research firms have given a buy rating to this gold financing company

Muthoot fin share priceRating agency Crisil had last month revised its long-term rating outlook from Crisil AA/stable to Crisil AA/positive

Muthoot Finance share price hit a fresh 52-week high to Rs 898 apiece in the noon deals on BSE on the back of strong December quarter earnings where the company posted a 66 per cent on-year rise in consolidated net profit at Rs 803 crore. The company had posted a net profit of Rs 485 crore in the corresponding quarter of last year. Following the quarterly results, at least two brokerage and research firms have given a buy rating to this gold financing company. Muthoot Finance shares surpassed its previous high of Rs 882 touched on Monday.”We expect the company to maintain its leadership position in gold financing owing to its strong business model (low cost of operations, high margins and negligible ALM & NPA issues) and revival in asset growth. Owing to strong traction in gold loans & earnings performance seen in 9MFY20, we have revised our yearly estimates,” JM Financial Services said in a research note. 

Muthoot Finance share price is already trading near the target price set by brokerage company of Rs 925, an upside of just 6 per cent. Shares of Muthoot Finance were trading 1.68 per cent lower at Rs 859.20 apiece on BSE in the noon deals. “We maintain our BUY rating on the stock and revise target price higher to Rs 925. The company remains a portfolio stock,” JM Financial Services said.

Since Q3 earnings, Muthoot Finance shares have surged over 20 per cent. While another brokerage company Nirmal Bank has set a target price of Rs 909. “We have revised our NII estimates by 7.7%/8.2%/9.4%, PPOP estimates by 7.7%/8.6%/10.2% and PAT estimates by 5.5%/7.4%/9.7% for FY20/FY21/FY22, respectively, valuing the stock at 2.1x H1FY22E P/BV and revising our target price to Rs909 (from Rs879 earlier),” Nirmal Bang Institutional Equities said in a research note.

Rating agency Crisil had last month revised its long-term rating outlook from Crisil AA/stable to Crisil AA/positive. Meanwhile, S&P BSE Sensex was trading 420 poinst or1.02 per cent lower at 40,635 points, while the broader Nifty50 index was ruling at 11,920, down 126 points or 1.05 per cent.

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