L&T Finance Q1 Results Review - Strong Quarter; Stable Asset Quality Metrics: ICICI Securities

ICICI Securities Report

L&T Finance Holding Ltd. reported a healthy set of results - profit after tax of Rs 6.86 billion, up 29% YoY and 24% QoQ (in-line with our estimate), return on assets of 2.7%, return of equity of 11.6%, retail assets under management growth of 31% YoY, total AUM growth of 13% YoY, 17 basis points QoQ rise in net interest margin to 9.31% and stable asset quality metrics.

L&T Finance continues to granularly track and execute its five-pillar execution strategy towards reaching a consolidated RoA range of 2.8% to 3.0%, thereby, creating a sustainable and predictable retail franchise.

We pencil in AUM compound annual growth rate of 26% over FY24–26E and expect L&T Finance to deliver calculated RoA of 2.5%/2.7% and RoE of 12%/14% for FY25E/FY26E, well-above its past ten-year average of ~1.5%/11.5%.

Maintain 'Buy' and target price of Rs 225, valuing L&T Finance at ~2 times FY26E adjusted book value (~10% above its one year-forward price to book mean of 10 years).

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