February 20, 2024

Motilal Oswal’s analysis report on Larsen and Toubro Fin Holdings

L&T Finance Holdings (LTFH) reported PAT of INR6.4b (in line) in 3QFY24. PPOP grew ~7% YoY to INR13.4b (in line), whereas credit score prices of ~INR5.1b translated into annualized credit score prices of two.5% (vs. 2.6% in 2QFY24 and a couple of.7% in 3QFY24). In 9MFY24, PAT grew ~58% YoY to INR17.7b.  Consolidated RoA/RoE rose 10bp/55bp QoQ to ~2.5%/~11.4% in 3QFY24. Retail RoA additionally improved ~10bp QoQ to ~3.4%. Retail loans grew ~8% QoQ/31% YoY, propelled by wholesome progress in MFI, Residence Loans and 2W. Private loans exhibited a brief blip in progress momentum however ought to resume the expansion trajectory from 4QFY24 onward. Mr. Sudipta Roy (ex-ICICI Financial institution) has succeeded Mr. Dinanath Dubhashi as MD and CEO. Mr. Roy will look to leverage his intensive expertise to additional strengthen the franchise. We anticipate that the retail combine will enhance to ~94-95% by Mar’24 from 91% as of Dec’23. Contemplating the accelerated rundown within the wholesale guide, we mannequin consolidated mortgage progress of 18% and PAT CAGR of 34% over FY23- FY26E, with consolidated RoA/RoE of two.7%/~15% in FY26E. A robust legal responsibility franchise, a well-capitalized steadiness sheet and a eager intent to additional speed up the sell-down of the wholesale guide have helped LTFH obtain its Lakshya 2026 targets a lot upfront.

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Outlook

LTFH has reworked itself right into a retail franchise, which might result in profitability enchancment and RoA enlargement. Retain BUY with a TP of INR200 (based mostly on 1.8x FY26E BVPS).

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L&T Fin.Holdings – 2612024 – moti