Are Muthoot Microfin Ltd latest results good or bad?

Muthoot Microfin Ltd's latest financial results for Q3 FY26 indicate a significant recovery from the previous year's challenges. The company reported a net profit of ₹62.44 crores, marking a substantial sequential increase of 104.52% from the previous quarter. This recovery is particularly noteworthy given the severe loss of ₹401.15 crores reported in Q4 FY25, which was largely attributed to aggressive provisioning due to deteriorating asset quality in the microfinance sector. In terms of operational performance, interest earned rose to ₹602.81 crores, reflecting a 4.59% quarter-on-quarter growth, although it remains 11.45% lower compared to the same quarter last year. The operating margin reached a record high of 49.57%, up from 44.83% in the preceding quarter, indicating enhanced operational efficiency and cost management. The profit before tax also more than doubled to ₹69.11 crores from ₹37.11 crores in the previous quarter, further underscoring the company's recovery trajectory. Despite these positive trends, Muthoot Microfin's return on capital employed (ROCE) remains low at 4.09%, which raises concerns about the sustainability of profitability. The company has also experienced a decline in year-on-year revenue, reflecting a cautious approach to expanding its loan book following the asset quality crisis. The financial results suggest that while Muthoot Microfin is making strides in recovering from a tumultuous period, it faces ongoing challenges related to capital efficiency and investor confidence. The company has seen an adjustment in its evaluation, reflecting the market's response to its recent performance and the broader concerns regarding its operational sustainability. Overall, the results indicate a critical juncture for Muthoot Microfin, requiring continued execution to rebuild investor trust and achieve sustainable profitability.