MOSL: L&T FINANCE HOLDINGS (Buy)-Strong performance continues
​L&T Finance Holdings: Strong performance continues
(LTFH IN, Mkt Cap USD5.7b, CMP INR199, TP INR240, 21% Upside, Buy)
- L&T Finance Holding’s (LTFH) 2QFY18 PAT grew 45% YoY to INR3.6b (12% above estimates). Robust core disbursement growth of 81% YoY (excluding IPO financing, which is more opportunistic), a pick-up in fee income across lending segments and a low tax rate were the key highlights of the quarter.
- Rural business: There was a clear uptick in disbursements in all segments, including microfinance, leading to 88% YoY growth in disbursements (highest-ever quarterly disbursements in each segment). Asset quality improved on a sequential basis (GNPL ratio down 45bp QoQ). PCR is improving, but remains inadequate at 39%, in our view. Management guides to improving asset quality in 2HFY18. An interesting thing to note is the sharp pick-up in fee income (+69% QoQ, 3x YoY).
- Housing business: Disbursement growth in the retail home loan/LAP segment remains sluggish, but was compensated by 54% disbursement growth in the builder loans segment. The share of builder loans in the housing finance segment now stands at 48%. Management has guided that the current INR15-18b quarterly run-rate of disbursements will continue.
- Wholesale business: In line with the trend of the prior quarters, growth in the infrastructure finance segment was robust at 182% YoY – the key driver being the DCM desk. Note that management’s strategy is to generate and sell-down loans in order to drive strong fee income. This is evident from the 3x YoY jump in fee income. LTFH continues to be opportunistic with IPO funding.
L&T Finance Holdings Limited is a non-banking financial institution-core investment company. The Company's segments include Retail and Mid Market Finance, which consists of rural products finance, personal vehicle finance, microfinance, housing finance, commercial vehicle finance, construction equipment finance, loans and leases and loan against shares; Wholesale Finance, which consists of project finance and non-project corporate finance to infra and non-infra segments across power-thermal and renewable; transportation-roads, ports and airports; telecom, and other non-infra segments; Investment Management, which consists of assets management of mutual fund and private equity fund, and Other Business, which consists of wealth management and financial product distribution. It offers a range of financial products and services across retail, corporate, housing and infrastructure finance sectors, as well as mutual fund products and investment management services.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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