Buy Larsen and Toubro Finance Holdings; target of Rs 109: Prabhudas Lilladher

Prabhudas Lilladher's research report on Larsen and Toubro Finance Holdings

In Q4, L&T Finance Holdings (LTFH) has walked the talk by showing strong growth in retail book (7.1% QoQ) and run-down in wholesale book at a good pace (37% QoQ). At right valuations, remaining wholesale book should also run down as quickly as possible, in our view. Management targets to improve the retail mix to 90% by Mar’24 and are in-line to do so. Total disbursements in Q4FY23 declined by 6% QoQ/16% YoY to Rs123bn, because of 83% YoY drop in wholesale disbursements. Total disbursements for FY23 grew 26% YoY to Rs470bn.

Outlook

We believe that if management can achieve Lakshya goals and continue to show strong growth in retail book while selling the wholesale portion at reasonable valuation, there can be re-rating in the stock. We maintain ‘BUY’ rating and our TP at Rs109 (1.25x on Sep’24E PABV).