Stock in Action: Muthoot Finance Ltd

Movement of the Day:

Technical pick: Buy Muthoot Finance futures (December) for a target of Rs 1,360 with a stop loss at Rs 1,300

Probable rationale behind the Surge:

Muthoot Finance, the country's largest gold loan company, has witnessed a substantial surge in its stock, propelled by an outstanding second-quarter performance ending on September 30, 2023. 
The reported numbers reveal an impressive 14.3% year-on-year rise in net profit, reaching ₹991 crores, signalling robust financial health and strategic growth. 
This stellar performance, combined with notable increases in loan assets, has become a driving force behind the recent surge in Muthoot Finance stock value.

Key Financial Highlights:

1. Net Profit Growth: Muthoot Finance reported a noteworthy 14.3% YoY increase in net profit, reaching ₹991 crores for Q2 2023. This surge reflects the company's adept financial management and its ability to capitalize on market opportunities.
2. Loan Asset Expansion: The lender experienced a remarkable 21% YoY growth in loan assets, amounting to ₹11,771 crores, showcasing Muthoot Finance's capacity to attract and manage a diverse portfolio of loans.
3. Gold Loan Asset Surge: Muthoot Finance's gold loan assets witnessed a significant 20% YoY increase, reaching ₹11,016 crores. This underlines the company's dominance in the gold loan sector, contributing to its overall success.

Consolidated Quarterly Numbers:

1. Net Sales: Muthoot Finance reported consolidated net sales of ₹3,606.14 crores in September 2023, up by an impressive 27.66% from ₹2,824.85 crores in September 2022. This surge indicates strong revenue generation.
2. Net Profit: The quarterly net profit for September 2023 stood at ₹1,059.62 crores, reflecting an 18.81% increase from ₹891.86 crore in the same period last year, demonstrating sustained profitability.
3. EBITDA: Muthoot Finance's EBITDA recorded a substantial growth of 25.91%, reaching ₹2,827.40 crores in September 2023 from ₹2,245.65 crores in September 2022. This signifies enhanced operational efficiency.
4. Earnings Per Share (EPS): The EPS for September 2023 increased to ₹26.39 from ₹22.22 in September 2022, showcasing improved earnings for shareholders.
5. Stock Performance: Muthoot Finance shares closed at ₹1,415.85 on November 28, 2023 (NSE), delivering remarkable returns. Over the last 6 months, the stock has yielded 18.05% returns, and over the last 12 months, it has surged by an impressive 26.42%.

The surge in Muthoot Finance's stock can be attributed to its exceptional second-quarter performance, marked by substantial growth in net profit, loan assets, and gold loan assets. 

The company's consolidated quarterly numbers, reflecting increased sales, profitability, and operational efficiency, have instilled confidence among investors, driving the notable rise in stock value. Investors seem poised to benefit from Muthoot Finance's strategic prowess and sustained financial success in the competitive financial landscape.