Muthoot Finance Initiating Coverage Research Report By Nirmal Bang

Volatility in gold prices remains the key risk, but we believe that demand for gold will remain strong thereby expect churning in good loan book for the industry. At CMP of Rs 222, MFL trades at 1.73x and 1.52x its FY16E and FY17E BV and 10.38x and 8.35x its FY16E and FY17E EPS respectively. We believe that Muthoot being the market leader is best positioned to benefit from improving business sentiment in the gold loan industry as asset quality concerns are likely to abate. We initiate coverage on the stock with a BUY rating on the stock and a target price of Rs 292 (2.0x FY17E ABV) implying a 32% upside.

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