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ICICI Securities Report
L&T Finance Ltd. continues to granularly track and execute its five-pillar execution strategy towards reaching a consolidated return on asset range of 2.8–3%, thereby, creating a sustainable and predictable retail franchise.
However, MFI asset quality headwinds at sector level due to the current issue of over leveraging and tightening of MFI guard rails and natural calamities in specific geographies (larger for L&T Finance), pose a risk to our credit cost estimate for L&T Finance or could be offset by utilisation of macro prudential provisions.
Moreover, since the industry is passing through a turmoil, it is unlikely that L&T Finance would be unimpacted, given that it commands >6% market share in JLG loans.
We, therefore, revise our target multiple to 1.8 times FY26E adjusted book value (versus 2.0 times earlier) and our target price stands revised to Rs 200 versus Rs 225 earlier. Maintain Buy.
Key Risks:
Loan growth slower than expected Prolonged MFI asset quality cycle
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