Accumulate L&T Finance Ltd For Target Rs. 160 By Geojit Financial Services Ltd
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Healthy operational performance
L&T Finance Ltd (LTF) offers financial products and services in the corporate, infrastructure and retail sectors. It also offers fund products and investment services.
* L&T Finance’s net interest margin (NIM) fell 37bps QoQ to 8.9% (+32bps YoY) in Q2FY25, due to a 16bps QoQ dip in yield on advances from portfolio mix changes, partly offset by a 5bps QoQ improvement in borrowing costs.
* Net interest income (NII) grew 3.7% QoQ (+18.1% YoY). The company's operating expenses ratio also improved, decreasing by 28bps QoQ (-12bps YoY) to 4.2%. As a result, consolidated profit after tax (PAT) increased 1.5% QoQ (+16.9% YoY).
* Total disbursements rose 1.0% QoQ (+10.7% YoY) in Q2FY25, driven by a strong performance in the housing segment, which grew 12.7% QoQ (+45.9% YoY). This was attributed to collaborations with top developers in prime locations and attractive product offerings. In addition, the company's SME disbursements surged 27.2% QoQ (+42.7% YoY), aided by diversification of existing sourcing channels
* While other disbursements remained soft on a QoQ basis, the company's loan book still grew 4.8% QoQ and 18.1% YoY.
Outlook & Valuation
L&T Finance reported strong Q2FY25 results, with expectations of further improvement driven by its focus on retail disbursement growth and collection efficiency. The company's strategy to acquire low-risk customers and expand its Project Cyclops initiative to other verticals will enhance its credit underwriting process. In addition, the seasonal monsoon impact is expected to subside in upcoming quarters, leading to an improvement in asset quality. The company's efforts to upgrade its digital infrastructure and increase brand visibility are likely to boost disbursement volumes across verticals. Therefore, we maintain our ACCUMULATE rating on the stock, based on 1.4x FY26E BVPS with a revised target price of Rs.160.
For More Geojit Financial Services Ltd Disclaimer https://www.geojit.com/disclaimer
SEBI Registration Number: INH200000345
