Sell Larsen and Toubro Financial Holdings; target of Rs 50: Prabhudas Lilladher

Prabhudas Lilladher is bearish on Larsen and Toubro Financial Holdings has recommended sell rating on the stock with a target price of Rs 50 in its research report dated May 18, 2020.

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May 19, 2020 / 11:05 IST

26 Aug, 2025 12:21

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

LTFH Q4FY20 earnings (Rs2.69bn down 55%QoQ) stood weakened on several counts: (a) Hefty provisions in nature of Stage 2 provisions (Rs 1.1bn) and macro prudential provisions (Rs 3.5bn) over & above COVID provisions (Rs 2.1bn) (b) 14% decline in QoQ disbursements led by rural & infra (c) tepid loans translating into 11%QoQ NII decline, 32% dip in other income (d) core operating profit taking a beating (down 21% QoQ). While liquidity sufficiency (Rs85bn), tax benefits (down 47%QoQ) and improved infra NPAs & hence marginally better Stage 3 at 5.4% stood supportive of FY20 performance, going forward, structural balance sheet weakness cannot be ruled out. While Q4FY20 did not provide a clear picture on book vulnerability to pandemic shocks, we build in weak collection trends and higher provisions on rural & retail business side.

Outlook

Against this backdrop, we incorporate subdued growth (4-12%), high 6.5% NPA translating into structurally lower RoEs of 7% by FY22. Hence, we trim core book multiple to 0.7x arriving at a price target of Rs50, maintain SELL.

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