L&T Finance share price jumps over 5% to 52-week high; Emkay Global upgrades stock, raises target

L&T Finance Holdings’ trading volumes surged to over 2 crore shares as compared to its one-week average of 86 lakh shares and the monthly average of 72 lakh shares. 

The stock has seen a decent upmove as it is up more than 12% in the past one month and has rallied 26% in three months.

Brokerage house Emkay Global Financial Services has upgraded its rating on L&T Finance Holdings stock to ‘Buy’ from ‘Reduce’ and raised the target price to ₹190 per share from ₹155 earlier.

The Non-Banking Financial Company (NBFC) L&T Finance Holdings is on the brink of completing the successful execution of its ‘Lakshya 2026’ led retailization plan, which the brokerage believes is considerably impressive and could drive growth and improve financials going forward.

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L&T Finance Holdings is establishing itself as a retail lender and has built sustainable moats around its key segments of rural financing, two-wheeler financing, and farm equipment financing. 

“Rural Financing and 2W Financing are LTFH’s customer-acquisition funnels that will enable it to cross-sell and upsell its other existing & upcoming products. With a well-versed retail lending professional like Sudipta Roy at its helm, we expect the company to register strong growth in crossselling and upselling as well as in the adjacency-led product diversification in areas such as co-branded cards (with aim to bag urban customers) and micro-LAP & gold loans (to onboard semi-urban and rural customers),” Emkay Global said.

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The company’s retail assets comprising over 90% of the loan book, its sustainable moats in Rural, 2W and Farm Equipment segments, and a strong balance sheet with material macro-prudential provisions and a prudent asset valuations buffer give enough comfort on sustained profitable growth, it added.

Additionally, the brokerage firm believes the company’s reducing drag from non-interest bearing SRs, a growing balance sheet delivering some operating leverage, and a stable over-the-cycle credit cost of ~2% will help it achieve ~3% consolidated RoA by FY26E.

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Emkay Global revised its estimates to factor in the accelerated rundown of the wholesale book and further realization of SR receivables in FY25 and FY26 leading to reduced investments in the book. 

“With the established retail business delivering a robust performance, the reduction in drag from the wholesale book continuing and the optionality from expansion into adjacent retail lending products under the leadership of Roy make a strong investment case for LTFH,” Emkay Global said.

At 12:40 pm, L&T Finance shares were trading 3.79% higher at ₹168.35 apiece on the BSE. 

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Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.

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Published: 03 Jan 2024, 12:41 PM IST