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Emkay Global
L&T Finance Holdings (Sell)
CMP: ₹119.1
Target: ₹98
L&T Finance Holdings LTFH reported another quarter of weak AUM growth at about 5 per cent y-o-y, with AUM reaching
₹995bn (-1 per cent qoq). Disbursements continued its downward momentum (down about 33 per cent y-o-y, about 2 per cent qoq) to ₹9,600 crore. Considering weak economic trends and the reshuffling of the lending portfolios, growth trajectory should remain under pressure, in our view.
NIM plus fees during the quarter remained healthy at about 729 bps; however, adjusting for oneoff income from defocused book and rising portfolio of infrastructure advances and conservative lending practices in developer finance, the margin trend is expected to ease.
Asset quality has remained flat sequentially, with GNPLs at 5.94 per cent and NNPLs at 2.67 per cent, with an overall provision coverage of about 57 per cent. The defocused book still forms 6 per cent of the AUM (about ₹5,400 crore) and the developer book continues to remain at about 15 per cent of AUM. We continue to remain concerned over the potential slippages coming from this piece of the book.
Maintain ‘Sell’ rating and ‘Underweight’ position in NBFC EAP, considering sluggish growth, cyclicality in business model and uncertainty over asset quality.
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