L&T Finance Ltd. share price target

17 July 2020 L&T; Finance Holdings (LTFH) reported 1QFY21 PAT of INR1.47b. However, excluding the INR2.25b one-time gain on the sale of the Wealth Management business to IIFLWAM, the company reported net loss of INR780m (v/s our PAT estimate of INR1.8b). As a result, the total contingency provision buffer (over and above NPA provisions) stands at INR12.4b (i.e. 1.4% of standard loans). As the company maintained higher liquidity on the balance sheet, it experienced a drag of INR850m net income. Reported fees and other income halved YoY to INR1.9b on lower rural/corporate disbursements. The share of customers who were granted moratorium as of 30th 33%; and RE, Infra, and IDF ~40%. In corporate lending, performance has been divergent toll collections / builder loan collections reached 80%/33% of pre-COVID-19 levels in June.

shocks, we build in weak collection trends and higher provisions on rural & retail business side. Against this backdrop, we incorporate subdued growth (4-12%), high 6.5% NPA translating into structurally lower RoEs of 7% by...

18 May 2020 LTFH reported 4QFY20 PAT of INR3.8b (-30% YoY), ~20% below our estimates. The miss was largely on account of lower-than-expected total income (8% miss) while opex and credit costs were in line. LTFH reported INR844m in net loss on fair value changes, which led to the topline miss. While as of Mar20, ~36% of AUM was under moratorium, a modest increase was seen in April. Disbursements in Rural finance declined ~20% QoQ, compared with 69% decline witnessed in other segments. The plunge in Rural lending was largely attributed to the Auto segment (Tractors and 2Ws). While NIM on a consolidated basis came in steady at 5.7%, lower disbursements led to ~50bp decline in the fee income margin to 1.2%. CoF declined 10bp QoQ to 8.4%. The share of CPs was down 300bp QoQ / 1,000bp YoY to 6%. The GNPL ratio improved 60bp QoQ to 5.

We revise our estimates for FY20-22E and now value the stock at 0.64x FY22E BVPS, with a revised target price of Rs. 62 and continue to recommend ACCUMULATE rating on the stock. Corona update and impact on industry Corona virus pandemic continues to disrupt economy throughout the world, as the number of infected people globally reached +1.4mn (~75k deaths) spread across 120 affected nations. IMF cut the CY20 world growth estimates by 40bps to 2.9%. Moody's reduced their GDP forecasts for India to 2.5% from 5.3% earlier for CY20 and S&P;...

We value the stock at 1.35x on FY22E BVPS, with a target price of Rs. 136 and recommend ACCUMULATE rating. Loan book continued to grow; Disbursements moderated LTFH's focused loan book registered a healthy 13.7% YoY growth, driven by a steady Rural Finance and Housing Finance loan book growth of 14.4% and 14.5% YoY, respectively. However, overall disbursements reduced further (-30.1% YoY), with infrastructure finance declining by 46.9%, primarily due to industry wide de-growth. On housing front, the group remained cautious and maintained tight credit policy...

L&T; Finance Holdings (LTFH) saw moderated loan growth of 14% YoY in focused business book. NIMs+Fees have remained steady at 7.29% (7.33% in 2QFY20). LTFH reported marginal rise in consolidated net profit to `591 Cr vs. `580 Cr in corresponding quarter last...

20 January 2020 LTFH reported 3QFY20 PAT of INR5.9b (+2% YoY), in line with our estimate of INR6.0b. The quarter was characterized by early teens loan growth across focused segments, stable asset quality and core RoE of ~16%. LTFH is expected to report moderate loan growth (7-8%), dragged by the defocused and wholesale book. With stability on cost of funds and growth in high-yielding assets, net income (NIM + fees) is expected to be healthy at ~7%. Overall PAT CAGR is expected to be ~12% with a robust RoE of ~17%. De-focused book declined ~55%/25% YoY/QoQ as the company sold off some DCM bonds without meaningful P&L; impact. LTFH raised INR104b in the quarter, of which ~50% came from term loans and ~35% via NCDs. Cost of funds was largely stable at 8.5%. Disbursements in microfinance have been range-bound at INR25-28b for the past eight quarters, while those in 2W and tractors picked up sharply on a QoQ basis due to the festival season.

A key driver of this has been microloans, wherein the company has expanded into 17 states the book now accounts for 48% of the total rural lending book compared to 35% in FY17. run-down of the de-focused wholesale lending book (structured finance and debt capital markets) and stronger growth in 2W finance and microloans, the share of retail lending (rural + retail housing finance) is expected to reach 43% by FY22. In the tough operating environment over past one year LTFH witnessed asset quality improvement with the GNPL ratio declining 110bp to 6.0% which is commendable. The improvement has been driven largely by wholesale and rural finance, while asset quality in housing finance has been largely stable. The GNPL ratio in the wholesale finance book is at 9% largely due to legacy stressed loans in the thermal power finance book. These loans comprise half of the total GNPLs in this book.

Disbursements were in line with the overall market as Rural, Housing and Infrastructure finance disbursements were down 1.6%, 21.3% and 19.0% respectively on account of industry wide de-growth. PAT declined 68.9% YoY to Rs. 174.5cr, due to the adoption of lower...

22 October 2019 LTFH reported a decent second-quarter performance amidst the tough economic environment. PAT (excluding one-off items) grew 16% YoY to INR6.5b (7% of our estimate). LTFH, however, took a one-time hit of INR4.7b on profits from DTA revision DTA under the new tax regime. Overall focused book disbursements declined 12% YoY to INR98b, driven by lower real estate and infra disbursements. Rural disbursements were in line with past trends. As a result, the share of rural lending in the total loan book increased 300bp YoY to 27%. While management expects 2HFY20 to be relatively slower in retail lending, it expects a pickup from FY21 onwards. Spreads were stable QoQ and YoY at 6.1%.Interestingly, GNPL/NNPL ratio increased 25/35bp QoQ due to seasonality in rural NPLs and the impact of floods in some areas. The company continues maintaining INR3.5b floating provisions. Tax rate for the quarter stood at 14% versus our estimate of 22%.