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ICICI Securities Report
Given the better-than-anticipated performance in Q1, the brokerage firm ICICI Securities have raised L&T Finance Ltd.'s earnings per share estimate by 2%/4% for FY27/28E, respectively, and now expects the company to report earnings and assets under management compound annual growth rate of ~24% over FY26–28E.
Hence, the brokerage has upgraded its rating to Buy from Add with a revised target price of Rs 370 vs Rs 315, valuing the stock at 2.7 times FY28E (earlier: 2.5x FY27E P/B).
L&T Finance Q1 Results
L&T Finance's Q1 FY27 result showcased robust performance with consolidated PAT up 12% QoQ and 29% YoY to Rs 9.02 billion. This growth was driven by robust retail loan book expansion (up 28% YoY), aided by a 36% YoY uptick in disbursements, improved asset quality (credit cost down 10bps QoQ), and the company's ongoing transition to an AI-native lender under its Lakshya 2031 strategy.
Overall, RoE was up 100bps QoQ to 12.71% and RoA was up 8bps QoQ to 2.48%. NIM+fee income to assets was stable QoQ at 10.47%, while opex to assets moderated >10bps QoQ to 4.03%, which aided PPoP to assets expansion by 9bps QoQ to 6.43%.
Asset quality also improved with a 2bps QoQ decline in GS3 to 2.86% and a 6bps QoQ decline in NS3 to 0.90%.
Key risks: Challenges to AUM growth due to competition or pricing pressure and higher-than-anticipated credit costs from its overall portfolio.
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