Morgan Stanley upgrades Muthoot Finance with a target of ₹3,660, projecting strong gold loan growth and improved earnings visibility through FY26–FY28.
What Is Driving Morgan Stanley’s Bullish View on Muthoot Finance?
About Morgan Stanley’s Latest Update
Morgan Stanley has reaffirmed its positive stance on Muthoot Finance, raising the target price to ₹3,660 from ₹3,340 and maintaining an Overweight rating.
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The upgrade reflects a stronger loan growth trajectory, improved asset quality, and higher operating leverage as India’s gold loan segment enters a steady expansion phase through FY26–FY28.
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Revised Earnings and Growth Forecast
Morgan Stanley has revised its standalone EPS estimates upward by 2.8% for FY26, 7.4% for FY27, and 7.6% for FY28.
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The brokerage expects Muthoot Finance’s FY26 standalone loan growth to reach 34% YoY (up from its prior 26% estimate), supported by robust traction in gold loan demand and improved collections.
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The firm also incorporated the company’s subsidiary, Muthoot Money, into its valuation framework, estimating an AUM base of around ₹5,000 crore.
Margins, Costs, and Credit Quality
Morgan Stanley expects net interest margins (NIMs) to average 11% between FY26 and FY28, with operating cost-to-AUM ratio improving to 2.7% from 2.9%.
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The brokerage believes that Muthoot’s disciplined underwriting, short-tenure loan structure, and low credit cost profile will continue to sustain superior profitability metrics compared to peers in the NBFC sector.
Sector Context and Competitive Advantage
India’s gold loan market is witnessing renewed demand amid liquidity needs, festive consumption, and increased rural participation.
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Muthoot Finance’s extensive branch network and established brand trust provide a strong moat against newer fintech entrants. The company’s faster turnaround time and prudent risk management are key factors behind its leadership position in the segment.
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Valuation and Scenario Analysis
The brokerage’s sum-of-the-parts (SOTP) valuation now incorporates both Muthoot Finance’s core gold loan business and the contribution from Muthoot Money.
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Earnings revisions and higher growth assumptions drive an overall uplift of 9.5–10% in both SOTP target and scenario values. Morgan Stanley believes that as long as gold prices remain stable, the company’s growth trajectory will remain firmly intact.
Investor Takeaway
Indian-Share-Tips.com Banking Sector Strategist Gulshan Khera, CFP®, who is also a SEBI Registered Investment Adviser, notes that Muthoot Finance’s strong earnings trajectory and stable asset quality make it a reliable compounding story in the NBFC space. He adds that the integration of Muthoot Money expands the firm’s addressable market, reinforcing its long-term structural growth potential.
Related Queries
How Is Muthoot Finance Benefiting from India’s Gold Loan Revival?
What Makes Muthoot Finance’s Business Model More Resilient Than Peers?
SEBI Disclaimer: The information provided in this post is for informational purposes only and should not be construed as investment advice. Readers must perform their own due diligence and consult a registered investment advisor before making any investment decisions. The views expressed are general in nature and may not suit individual investment objectives or financial situations.
Muthoot Finance Morgan Stanley Report, Gold Loan Growth, NBFC Sector Outlook, Muthoot Money Integration, SOTP Valuation, Overweight Rating, Nifty Tip, BankNifty Tip, F&O Tip, Future & Option Tip, Indian-Share-Tips.com, SEBI Registered Investment Adviser
