Motilal Oswal is bullish on Larsen and Toubro Financial Holdings has recommended buy rating on the stock with a target price of Rs 75 in its research report dated May 18, 2020.
Motilal Oswal 's research report on Larsen and Toubro Financial Holdings
LTFH reported 4QFY20 PAT of INR3.8b (-30% YoY), ~20% below our estimates. The miss was largely on account of lower-than-expected total income (8% miss) while opex and credit costs were in line. LTFH reported INR844m in net loss on fair value changes, which led to the topline miss. LTFH created additional provisions of INR3.1b for the impact of COVID-19 during the quarter, of which INR2.1b was as per the RBI’s requirement of 5% provisioning against 1-89dpd loans under moratorium. The provision would be repeated in 1QFY21. While as of Mar’20, ~36% of AUM was under moratorium, a modest increase was seen in April.
Asset quality performance would be the key monitorable going ahead. We cut our FY21/FY22 EPS estimates by 17%/8% to factor in higher credit costs given the extended lockdown. Buy, with TP of INR75 (0.8x FY22E BVPS).
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