Buy Larsen and Toubro Finance; target of Rs 250: Motilal Oswal

Motilal Oswal is bullish on Larsen and Toubro Finance recommended buy rating on the stock with a target price of Rs 250 in its research report dated July 21, 2025.

Broker Research

July 23, 2025 / 15:24 IST

buy

26 Aug, 2025 12:21

Volume

Todays L/H

Motilal Oswal's research report on Larsen and Toubro Finance

L&T Finance (LTF)’s 1QFY26 PAT grew 2% YoY to INR7b (in line). NII grew ~8% YoY to INR22.8b (~5% beat). Opex grew ~9% YoY to ~INR10.5b (~6% higher than MOFSLe). The cost-to-income ratio declined to ~40% (PQ: ~41.3%). PPoP grew ~7% YoY to ~INR15.8b (in line) for the quarter. Credit costs were INR6.3b (in line), translating into annualized credit costs of ~2.23% (PQ: 2.55%/PY: 2.37%). LTF utilized macroprudential provisions of INR3b in 1QFY26 towards rural business finance (MFI). Before the utilization of the macroprudential provision, credit costs were ~3.43% (PQ: 3.8%) in 1QFY26. LTF now has unutilized macro provisions of ~INR2.75b.

Outlook

LTF’s FY26 will be a year of transitioning towards the targeted loan mix and implementing Cyclops in Tractors, PL, and SME segments. We expect LTF to deliver a structural improvement in profitability and RoA from FY27 onwards. Reiterate BUY with a TP of INR250 (based on 2x Mar’27E BVPS).

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