Buy Larsen and Toubro Finance Holdings; target of Rs 155: Sharekhan

Sharekhan's research report on Larsen and Toubro Finance Holdings

The company continued its retailisation journey, legacy wholesale book has been declining faster, and a favourable cycle is helping its retail business to grow faster. Core retail business performance remained strong driven by healthy retail assets growth, better margins, and lower credit cost, which translated into RoA for the retail segment over ~3.3%. Retail disbursements grew robustly by 32% y-o-y/ 21% q-o-q leading to strong retail AUM growth of 33% y-o-y/ 8% q-o-q. However, overall, loan book declined by 13% y-o-y/ down 1% q-o-q as diminishing wholesale book constrained the net loan growth. Overall asset quality trends were stable. We believe growth in retail franchise would uplift overall loan growth and RoE in FY25 as a majority of the wholesale book is expected to get rundown by FY24E.

Outlook

We reiterate Buy on the stock with an unchanged PT of Rs. 155. At CMP, the stock trades at 1.2x/1.1x FY2025E/FY2026E BV estimates.