Buy L&T Finance Holdings; target of Rs 230: Prabhudas Lilladher


Prabhudas Lilladher’s research report on L&T Finance Holdings

LTFH 4QFY18 earnings were in-line with our estimates at Rs4.06bn (PLe: Rs4.08bn). Surprisingly while provisions were lower, it was offset by higher opex & tax outgo. Loan book growth of 26% YoY was commendable with non-wholesale business on strong footing, though it showed some pressure on yields/spreads. Some of the weakening of spreads were offset from continued traction in fees mainly from sell downs. Main highlight was improvement in asset quality with PCR improvement to 52% as LTFH continued with its accelerated provisioning. We estimate loan growth of 21% CAGR, steady margins, sustainable fee income and lowering credit cost as PCR moves up to 65-68% over FY20E with limited asset quality issues.


Outlook

We retain BUY with TP of Rs230 based on 2.6x Mar-20 lending ABV and Sub value of Rs36.

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