L&T Finance Ltd. share price target

Profitability is expected to improve rapidly over the short term with strong market share in the rural regions. While asset quality concerns remain, the capital infusion via upcoming rights issue should provide some respite. We thereby retain our ACCUMULATE rating with roll forward target price of Rs.115 based on 1.2x FY23E BVPS. NIM improves on lower borrowing costs Company reported net interest income of Rs. 1,581cr (+13.5% QoQ, +7.7% YoY). NIM + Fee & other income margin rose to 7.4% (+90bps QoQ, +10bps YoY). The interest...

continued disbursements momentum which should cushion earnings ahead, we remain circumspect on asset quality. Status-quo on SC order is masking the true asset quality picture; we maintain 6.6%-6.7% NPA forecasts over FY21-22 with credit costs uptick to 240bps for FY21. As return profile for FY22-23 stands weak at ~10% RoE/ 1.2% RoA, we reiterate SELL, valuing...

With improvement in collections and reduction in moratorium accounts, we value the stock at 0.77x on FY22E BVPS of Rs. 91, with a revised target price of Rs. 70 and retain our ACCUMULATE rating. Loan book continued to grow; Disbursements moderated LTFH's focused loan book stood at Rs. 93,706 cr, (+3.5% YoY), driven by steady growth in Rural Finance (+6.3% YoY), Housing Finance (+3.5% YoY), and Infrastructure Finance (+1.7% YoY). The disbursements reached Rs. 2,318cr (-75.9% YoY), due to drop in Housing, Rural, and Infrastructure disbursements by 85.1% YoY, 78.4% YoY...

projects, 83% of which lie under morat (b) 13% micro finance book that witnessed pull back in center meetings, albeit morat down to 48% from 100% in Mar'20 (c) 40% infra business segment that continues to experience underlying pressures (tepid traffic drivers, weakened supply chain and inconsistent labor availability). While moratorium today is masking the de facto asset quality stress, morat delinquencies cannot be ruled out. We, therefore, build in higher NPA (6.5%+) and elevated credit costs (150-22bps+) over FY21-22E. Consequently, RoEs settle to structurally lower levels of ~10%...

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...