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JMFL
L&T Finance (Buy)
CMP: ₹175.25
Target: ₹250
We hosted Mr. Dinanath Dubhashi — MD & CEO, L&T Finance Holdings (LTFH) — in Singapore. Key takeaways from the meeting are: a) Continued focus on retailisation has seen the share of rural + housing increase to 46 per cent versus 35 per cent last year. Going forward, management expects a balanced product mix, with infra at 40 per cent and rural + housing at 60 per cent over the medium term; b) Focus on cross-selling and strengthening relationships with dealers would drive robust growth in the rural segment; c) Fee income has become more granular, while sell-downs continue to remain robust with rising demand from NBFCs; d) Management expects the NIM + fee ratio of 6.6 per cent to continue; e) Cost ratios should remain under control, driven by higher productivity and focus on direct sourcing; f) The worst of the asset quality pressures is over and management expects credit costs to reduce to 1.5 per cent.
We value LTFH at 3x Mar’20, implying a March 2019 target price of ₹250. LTFH remains our top pick in the NBFC space.
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