Buy L&T Finance; target of Rs 200: Motilal Oswal

Motilal Oswal's research report on L&T Finance

L&T Finance (LTF) reported 17% YoY growth in PAT to INR7b (in line) in 2QFY25. PPoP grew ~23% YoY to ~INR15.9b (in line). Credit costs stood at INR6.5b (vs. MOFSLe of INR6b), translating into annualized credit costs of ~2.6% (vs. 2.4% in 1QFY25 and 2.6% in 2QFY24). Write-offs stood at INR6.6b (INR4.8b in 1Q). Consol. RoA/RoE stood at 2.6%/11.7% in 2Q. Retail assets contributed ~96% to the loan mix (95% in 1Q). Retail loans grew ~28% YoY, led by healthy growth in 2W, home loans, LAP, and SME. LTF has started to regrow its personal loans book, up 8% QoQ. Given the sectoral stress, rural business loans (microfinance) grew 3% QoQ.

Outlook

We estimate a PAT CAGR of 26% over FY24-27, with consolidated RoA/RoE of 2.8%/~15% in FY27. Reiterate our BUY rating on the stock with a TP of INR200 (based on 1.6x Sep’26E BVPS).