L&T Finance Q4 Review - Earnings Miss Due To Provisions On Security Receipts; NIM Improved QoQ: Motilal Oswal

Motilal Oswal Report

L&T Finance Holding Ltd. reported a Q4 FY24 profit after tax of Rs 5.5 billion (18% miss). Pre-provision operating profit grew ~7% YoY to Rs 13.6 billion (in line), while credit costs of ~Rs 6.7 billion translated into annualized credit costs of 3.2% (previous quarter: 2.5% and previous year: 2.2%).

Earnings miss was primarily because of additional provisions of ~Rs 1.75 billion on the security receipts. L&T Finance now carries ~Rs 7.2 billion of additional provisions on the SRs (including ~Rs 5.5 billion from fair valuation of Loans). Consolidated return on asset/return on equity declined 35 bp/180 bp QoQ to ~2.2%/~9.5% in Q4 FY24.

Retail assets contributed ~94% to the loan mix (PQ: 81%). Retail loans grew ~31% YoY, led by healthy growth in MFI, two-wheeler, home loans, and SME. The company continued to calibrate growth in personal loans which was flat QoQ for the second consecutive quarter.

The retail mix improved to ~94% in March 24 from 91% as in December 2023. Management shared that the wholesale loan-book has further declined to ~Rs 44 billion in April 2024 (versus ~Rs 55 billion as on March-24). We model total loan growth of 26% and PAT CAGR of 35% over FY24-FY26E, with consolidated RoA/RoE of 2.7%/~14% in FY26E.

A strong liability franchise, accelerated run-down in the wholesale loan book, and a well-capitalised balance sheet have helped L&T Finance achieve its Lakshya 2026 targets much in advance. L&T Finance has transformed itself into a retail franchise, which would lead to profitability improvement and RoA expansion.

Retain Buy with a target price of Rs 210 (based on 1.8 times FY26E book value per share).

Click on the attachment to read the full report:

DISCLAIMER

This report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit.

Users have no license to copy, modify, or distribute the content without permission of the Original Owner.