Accumulate Larsen and Toubro Finance Ltd; target of Rs 160: Geojit Financial Services

Geojit Financial Services research report on Larsen and Toubro Finance Ltd

L&T Finance Ltd (LTF) offers financial products and services in the corporate, infrastructure and retail sectors. It also offers fund products and investment services. L&T Finance’s net interest margin (NIM) fell 37bps QoQ to 8.9% (+32bps YoY) in Q2FY25, due to a 16bps QoQ dip in yield on advances from portfolio mix changes, partly offset by a 5bps QoQ improvement in borrowing costs. Net interest income (NII) grew 3.7% QoQ (+18.1% YoY). The company's operating expenses ratio also improved, decreasing by 28bps QoQ (-12bps YoY) to 4.2%. As a result, consolidated profit after tax (PAT) increased 1.5% QoQ (+16.9% YoY). Total disbursements rose 1.0% QoQ (+10.7% YoY) in Q2FY25, driven by a strong performance in the housing segment, which grew 12.7% QoQ (+45.9% YoY). This was attributed to collaborations with top developers in prime locations and attractive product offerings. In addition, the company's SME disbursements surged 27.2% QoQ (+42.7% YoY), aided by diversification of existing sourcing channels. While other disbursements remained soft on a QoQ basis, the company's loan book still grew 4.8% QoQ and 18.1% YoY.

Outlook

Therefore, we maintain our ACCUMULATE rating on the stock, based on 1.4x FY26E BVPS with a revised target price of Rs.160.

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