Target: ₹200

CMP: ₹166.85

L&T Finance Holdings (LTFH) reported PAT of ₹640 crore (in line) in Q3-FY24. PPOP grew about 7 per cent y-o-y to ₹1,340 crore (in line), while credit costs of ₹510 crore translated into annualised credit costs of 2.5 per cent (vs. 2.6 per cent in Q2-FY24 and 2.7 per cent in Q3-FY24). In 9M-FY24, PAT grew about 58 per cent y-o-y to ₹1,770 crore.

Consolidated RoA/RoE rose 10bp/55bp QoQ to 2.5/11.4 per cent in Q3-FY24. Retail RoA also improved about 10 bps q-o-q to about 3.4 per cent.

We expect that the retail mix will improve to 94-95 per cent by Mar’24 from 91 per cent as of Dec’23. Considering the accelerated rundown in the wholesale book, we model consolidated loan growth of 18 per cent and PAT CAGR of 34 per cent over FY23-FY26, with consolidated RoA/RoE of 2.7/15 per cent in FY26E.

A strong liability franchise, a well-capitalized balance sheet and a keen intent to further accelerate the sell-down of the wholesale book have helped LTFH achieve its Lakshya 2026 targets much in advance. L&TFH has transformed itself into a retail franchise, which would lead to profitability improvement and RoA expansion.