MOSL: L&T FINANCE HOLDINGS (Buy)-Transient impact of COVID 2.0; recovery held up well in Jun’21
L&T FINANCE HOLDINGS: Transient impact of COVID 2.0; recovery held up well in Jun’21
(LTFH IN, Mkt Cap USD3b, CMP INR91, TP INR110, 22% Upside, Buy)
- LTFH reported a 1QFY22 PAT of INR2.7b (35% miss). Additional COVID-19 provisions stood at INR3.7b in 1QFY22. It further restructured INR9.8b under OTR 2.0. While NII was broadly in line, lower other income, and higher opex (up 31% YoY) led to a PAT miss.
- Loan book fell ~11% YoY in 1QFY22, driven by a QoQ decline in Micro loans, 2W finance, and Real Estate finance.
- Even though LTFH has accounted for most of the asset quality pain, there will be a moderation in AUM growth and consequent higher cost ratios. We cut our FY22E/FY23E EPS estimate by 21%/19%. We maintain Buy with a TP of INR110 per share (1.2x FY23E BVPS).
Disbursements impacted in May’21, the situation improved in Jun’21
- Disbursements fell 36% QoQ to INR52.2b. In May’21, disbursements were impacted across product segments, except Infrastructure. Tractors continued to witness robust demand, with a 9% QoQ growth, and supported overall rural disbursements, even as 2W and ML disbursements were impacted by lockdown/collection constraints.
- Disbursements in Home Loans/LAP/Real Estate remained muted, with continued conservatism in financing the SENP segment and no new sanctions in Wholesale Real Estate lending.
- Despite decent disbursements in the Wholesale/Infra segment, the corresponding loan book fell ~11% QoQ because of strong collections through sell downs and repayments/prepayments.
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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