Muthoot Finance has received a bullish upgrade from Morgan Stanley, with the global brokerage firm raising its price target based on strong gold loan segment performance expectations.

Morgan Stanley's Upgraded Assessment

The brokerage has maintained its overweight rating on Muthoot Finance while hiking the price target. The revision reflects Morgan Stanley's confidence in the company's gold loan business prospects.

Enhanced Growth Projections

Morgan Stanley has revised its growth estimates upward, reflecting stronger expectations for the gold loan segment. The firm's updated projections demonstrate increased confidence in Muthoot Finance's business trajectory.

The brokerage has raised its FY26 to FY28 earnings per share estimates, with the upward revision driven entirely by higher anticipated gold loan growth. This adjustment reflects Morgan Stanley's view that the gold loan segment may be a key performance driver for the company.

Analyst Sentiment and Market Outlook

The broader analyst community shows mixed but generally positive sentiment toward Muthoot Finance. According to Bloomberg data, the distribution of analyst recommendations reflects varied perspectives on the stock's prospects.

Despite Morgan Stanley's bullish stance, the average 12-month consensus price target among all analysts implies a downside of 3.10%, suggesting some divergence in market expectations.

Sum-of-Parts Valuation Impact

Morgan Stanley's analysis indicates that the strong outperformance expectations in the gold segment have led to an 8.00% increase in the sum-of-parts price target and scenario values. This methodology suggests the brokerage sees multiple value drivers contributing to the enhanced target price, with gold loan growth being the primary catalyst.

Muthoot Finance shares reached record high levels on Wednesday, as the global gold price rally continues to fuel significant gains in the stock. The company is experiencing its strongest performance since listing, with shares trading 1.9% higher at ₹3,879 during the day's session.

Record-Breaking Annual Performance

The stock has delivered exceptional returns, marking a milestone year for investors. The performance metrics highlight the company's strong momentum in recent years.

This 81.00% gain represents the best calendar year return since the company's listing in 2011, surpassing the previous record of 78.00% achieved in 2014. The stock has now delivered positive returns for three consecutive years, demonstrating consistent growth momentum.

Global Gold Market Dynamics

The surge in Muthoot Finance shares directly correlates with record-high global gold prices. Several factors are driving this unprecedented rally in precious metals markets. Renewed geopolitical tensions between the US and Venezuela have increased safe-haven demand for gold. Additionally, market expectations of further monetary easing by a potentially more dovish Federal Reserve when a new Chair takes charge are supporting gold prices.

Robust ETF inflows and continued buying from global central banks are providing additional support to gold prices. In Indian markets, gold futures on the MCX are nearing ₹1.40 lakh per 10 grams, reflecting the global trend in domestic pricing.

Strong Financial Performance

The company's recent quarterly results demonstrate robust operational performance across key metrics. Financial highlights from the most recent quarter show significant growth in profitability and core income.

The gold loan business represents the dominant portion of the company's operations, with ₹1.24 lakh crore in assets under management comprising well over 90% of the consolidated AUM of ₹1.47 lakh crore at the end of the September quarter.

Management Outlook and Analyst Recommendations

Management confidence in the business trajectory is evident through revised growth projections. The company has significantly upgraded its growth outlook for the year to between 30% and 35%, representing a substantial increase from the earlier guidance of 15%.

Brokerage firm Jefferies has maintained its positive stance on the stock, continuing its "buy" rating with a price target of ₹4,000. The firm expects Muthoot's margins to expand alongside easing credit costs, supporting the bullish outlook.

The stock's momentum remains strong, with shares up for the fifth straight month in December, reflecting sustained investor confidence in the company's gold-backed lending business model amid favorable market conditions.