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Target: ₹125
CMP: ₹95.88
L&T Finance Holdings reported consolidated profit of ₹500 crore (+47 per cent YoY) led by lower credit costs. NII at ₹1,680 crore (+18% YoY) and PPOP at ₹1,240 crore (+9 per cent YoY) were largely in line with our estimates.
While overall loan assets declined sharply (-8 per cent YoY, -8.5 per cent QoQ) led by decline in wholesale assets (-53 per cent YoY), retail assets scale up continued at a brisk pace at 35 per cent YoY (as per management’s indicated strategy).
Retail assets now form about 75 per cent of the lending assets mix for L&TFH. At the analyst meet, mgmt. reiterated its focus on scaling up the retail portfolio to about 90 per cent of the overall lending book by FY26 led by continued traction in its identified segments of rural micro/group loans. The management believes focus on analytics, cross sell to existing customer base and continued investments in its tech prowess should aid L&T FH in delivering its targeted RoA of 2.8-3 per cent.
In our view, the scale up of L&TFH’s retail portfolio is encouraging and should translate into better medium-term RoEs as the drag from wholesale portfolio reduces. We maintain BUY with a revised TP of ₹125.
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