Strong Buy Recommendation Of NBFC Stock For 42% Gain

l&t finance holdings

Stewart & Mackertich has recommended the “strong buy” of a high-quality NBFC stock. The company is well placed to accelerate growth towards retail lending with healthy margins, stronger fee income and lower credit costs.

It has established fee as a second line of income to counter interest rate cycle. The company has used power of digital and data analytics to unlock RoE and improved competitive position across all products.

L&T finance Holdings Ltd is the recommended stock. Click here to read the report.

L&T Finance Holdings Ltd Ltd is presently quoting at Rs. 131.

The target price is Rs. 186.

Accordingly the potential gain is 42%.

The investment rationale of the buy recommendation is as follows:

Company Overview

L&T Finance Holdings Limited (LTFH) is a holding company. The Company offers a range of financial products and services across the corporate, retail and infrastructure finance sectors through its wholly owned subsidiary. It operates primarily in the business segment of investments activity.

Its product portfolio across four business groups includes retail finance, which includes construction equipment finance, transportation equipment finance, rural products finance,rural enterprise finance, micro finance and financial products distribution;corporate finance, which includes corporate loans and leases and supply chain finance; infrastructure finance, which includes project finance and corporate loans, financial advisory services and equity investments, and investment management.




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Key Highlights

❑ LTFH has successfully dealt with headwinds over the last 2 years and particularly in the last 3 months through resilient business model, strong risk management framework, immediate steps to control damage, using the learning to further strengthen business model.

❑ The Company has achieved a RoE of 18.45% in Q1FY19, and maintained its profitability with 18.47% RoE in Q2FY19. Consolidated PAT increased by66% to INR560 Cr in Q2 FY19 vs INR338 Cr in Q2 FY18.

❑ Loan Book has increased by 24% from INR73487 Cr to INR91201 Cr & (NIMs + Fees) has increased from 5.74% to 6.86%.

❑ Asset quality performance improved significantly like Gross Stage 3 levels have gone down to 7.10% from 10.95%, Net Stage 3 levels have gone down to 2.79% from 5.40%, Provision coverage increased to 62.47% from53.57%.

❑ The Company is maintaining additional liquidity like INR6166 Cr in the formof cash, FDs, other liquid instruments, Undrawn bank lines of INR4146 Cr& Back up line from L&T of INR2000 Cr.

❑ LTFH has the ability and strong promoters background to raise funds,having raised INR18468 Cr since 21st September, 2018

Outlook & Valuation

The company is well placed to accelerate growth towards retail lending with healthy margins, stronger fee income and lower credit costs. LTFH has established fee as a second line of income to counter interest rate cycle.

The company has used power of digital and data analytics to unlock RoE and improved competitive position across all products. We maintain our price target and assign a P/B(x) multiple of 2.0 (x) on FY21E book value, to arrive at a target price of INR186.

Click here to download the Research report on L&T Finance Holdings Ltd




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