Buy L&T Finance Holdings; target of Rs 185: Sharekhan

Buy

Sharekhan's research report on L&T Finance Holdings

L&T Finance Holdings Limited’s (LTFH) core retail business performance remained strong, capitalising on strong macros, driven by healthy retail assets growth, better margins, and lower credit cost. The wholesale business continued to run down, in line with its stated strategy. Net interest income (NII) grew 13% y-o-y/2% q-o-q. Aggregate NIM and fee income (calculated) improved by 9bps q-o-q to 11.2% vs. 11.1%. Although the cost of funds was marginally higher q-o-q, the increasing share of retail assets and higher fees led to improvement. Total operating expenses were up 25% y-o-y/10% q-o-q, led by continued investments in technology, business, and people.

Outlook

We maintain our BUY rating with an unchanged PT of Rs. 185. LTFH has re-oriented itself into a retail franchise, led by a favourable cycle. The company is now looking at balancing the business matrices while pursuing growth. The focus is on creating a sustainable and predictable retail franchise, but execution remains key monitorable. The company’s endeavours post-tax consolidated RoA of 2.8-30% in FY2026 vs. 2.3% currently in FY2024.

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