Reduce Larsen and Toubro Finance; target of Rs 140: Emkay Global Financial

Emkay Global Financial recommended reduce rating on Larsen and Toubro Finance with a target price of Rs 140 in its research report dated January 21, 2025.

Broker Research

January 22, 2025 / 12:37 IST

Reduce

26 Aug, 2025 12:21

Volume

Todays L/H

Emkay Global Financial's research report on Larsen and Toubro Finance

LTF delivered an in-line performance in Q3FY25, in terms of AUM growth, PAT, and credit cost. However, ongoing stress in the MFI segment is expected to keep near-term asset growth below the targeted growth of 25%. Slower disbursement in the MFI segment, focus on acquiring prime customer, and changing asset mix would keep margins under pressure, as evidenced in the ~50bps contraction in NIM + fees during Q3FY25. Credit cost for the Quarter was stable at ~2.8%, and the management expects it to peak-out in Q4, while utilizing ~Rs3-3.5bn from its macro prudential buffer (utilized Rs1bn in Q3).

Outlook

LTF is confident that its strategy of acquiring prime customer and implementation of its tech ‘Cyclops’ across the product segment will help reduce acquisition and credit costs, thereby helping it achieve its RoA target of 2.8-3% in the medium term. Factoring in the current challenges, along with growth and margin expectations, we cut FY25-27E EPS by 2-4%, and maintain REDUCE. We revise down Dec-25E TP to Rs140 (vs Rs150 earlier), implying FY26E P/ABV of 1.3x.

For all recommendations report, click here