Muthoot Finance shares dropped more than 6 per cent on Thursday, a day after the gold finance company declared its earnings for the April-June period. The Muthoot Finance stock started the day marginally lower at Rs 1,250 per share compared to its previous close of Rs 1,256, and continued to decline in early trade. Muthoot Finance shares registered an intraday low of Rs 1,180 in the first half of the session, down 6.05 per cent from its previous close.
At 12:35 pm, the Muthoot Finance scrip quoted down 5.30 per cent at Rs 1,189.55. (Track Muthoot Finance Shares)
For the quarter ended June 30, Muthoot Finance posted a 53.46 per cent rise in consolidated net profit to Rs 853.51 crore, from Rs 556.19 crore in the corresponding period a year ago.
Its sales rose 25.96 per cent to Rs 2,604.48 crore in the first quarter of current financial year, from Rs 2,067.67 crore in the year-ago period.
In a note on Wednesday, brokerage firm Motilal Oswal said that even as the company missed its total income expectations by 8 per cent, it was offset by lower operating costs.
It also said Muthoot Finance witnessed more collections than disbursements during the quarter, resulting in a decline in loan book. However, online disbursal during the lockdown has picked up, Motilal Oswal noted.
"Demand for gold loans picked up in July - August 2020, and we expect it to sustain given the tough economic environment," said Motilal Oswal Institutional Equities, which has a "neutral" rating on the stock, with a target price of Rs 1,300.
As for the fundamentals, the brokerage firm said, "Over the past year, Muthoot Finance has increased liquidity on the balance sheet from 3 per cent of loans to 20 per cent of loans, which is comforting. However, this is likely to be a drag on margins going ahead."
While Muthoot Finance's subsidiaries have witnessed improving collection efficiency, Motilal Oswal said it remains cautious about its asset quality outlook.