L&T Finance Holdings Achieves Steady Growth, Maintain Buy Rating with ₹200 Target

L&T Finance Holdings (LTFH) has shown consistency in its financial performance with a net profit after tax (PAT) of ₹640 crore for the third quarter of the fiscal year 2024, which falls in line with market expectations. A year-on-year increase of approximately 7% in the pre-provision operating profit (PPOP) to ₹1,340 crore was also reported, reflecting steady growth. Credit costs were reported at ₹510 crore, indicating an annualized credit cost of 2.5% compared to the previous quarter's figure of 2.6% and 2.7% in the same quarter the year before. Overall, the first nine months of FY24 saw a remarkable 58% year-over-year increase in PAT, amounting to ₹1,770 crore.

Positive Trends in Return Metrics

The consolidated Return on Assets (RoA) and Return on Equity (RoE) have both seen an increase, with the RoA up by 10 basis points and the RoE by 55 basis points, quarter over quarter, registering at 2.5% and 11.4% for Q3-FY24, respectively. An uptick was also observed in the retail Return on Assets, which improved by approximately 10 basis points sequentially reaching around 3.4%.

Future Outlook and Strategy

Analysts anticipate a noticeable improvement in LTFH's retail loan mix, which is projected to increase to 94-95% by March 2024, rising from 91% as of December 2023. With the strategic initiative to expedite the reduction of the wholesale book, the company is expected to achieve a compounded annual growth rate (CAGR) of 18% in consolidated loans and a 34% CAGR in PAT over FY23-FY26. By the end of FY26, the projected consolidated RoA and RoE stand at an optimistic 2.7% and 15%, respectively.

LTFH has laid a strong foundation with a robust liability structure, a well-capitalized balance sheet, and a focused strategy to accelerate the divestment of its wholesale book, enabling the company to meet its 'Lakshya 2026' vision ahead of schedule. The company's evolution into a retail-focused entity is expected to drive improvements in profitability and RoA expansion.

BrokerCall, LTFinance, Growth