26 analysts have coverage on Muthoot Finance, of which 14 have a "buy" rating, seven say "hold" and five have a "sell" rating on the stock.

By Hormaz Fatakia

Shares of gold financier Muthoot Finance Ltd. fell as much as 11% on Monday, August 3, as they will be reacting to their June quarter results that were reported after market closing hours on Friday.

The numbers have resulted in at least three brokerages, Jefferies, Investec and Nirmal Bang, downgrading the stock, as well as cutting their price targets on it.

Jefferies has downgraded Muthoot Finance to "hold" from its earlier rating of "buy" and has cut its price target to ₹3,300 from ₹4,350 earlier.

The brokerage said that Muthoot Finance saw margin compression due to normalization of yield, rollover to lower rate slabs and price cuts due to competition.

Although customer additions have picked up for Muthoot, Jefferies believes that competition and rangebound gold prices should continue to weigh on Earnings per Share (EPS) growth in financial year 2027.

As a result, Jefferies has cut its EPS estimates for Muthoot Finance by 7% to 8% over financial year 2027 and 2028, and sees the current year EPS growth at 5%.

However, it believes that valuations at 2.2 times its one-year forward book value for a 25% RoE figure, should offer some support.

Investec has downgraded Muthoot Finance to "sell" from its earlier rating of "hold" and cut its price target to ₹3,150 from ₹3,300 earlier.

Nirmal Bang has also downgraded the stock to "hold" from its earlier rating of "buy" and cut its target to ₹3,000 from ₹4,265 earlier.

On the flip side, Bernstein has maintained its "outperform" rating on Muthoot Finance with a price target of ₹4,500.

Bernstein said that a healthy gold loan AUM growth during the quarter was overshadowed by a sharp 300 basis points contraction in margins.

"While asset quality remains stable, margin reset adds pressure to the current strong earnings growth trajectory," Bernstein wrote in its note.

Although CLSA continues to have an "accumulate" rating on Muthoot Finance, it has cut its price target down to ₹4,000 from ₹4,600 earlier.

CLSA said that after two quarters of decline in customer count, a 2.5% sequential growth is a positive, suggesting that the company has changed its earlier stance of profitability over growth.

The June quarter was a soft one for Muthoot Finance as yield normalization led to NIM compression, although asset quality remained stable. While Standalone AUMs grew by 43% from last year, Gold Loan AUMs grew by 44% from the year-ago period. The Gold loan AUM is 95% of the standalone AUM for the company.

26 analysts have coverage on Muthoot Finance, of which 14 have a "buy" rating, seven say "hold" and five have a "sell" rating on the stock.

Shares of Muthoot Finance are trading 10.9% lower on Monday at ₹2,783.6. The stock has now extended its year-to-date losses past 25%.