L&T Finance RoA crosses FY26 target in Q1 FY24, brokerages cheer

Non-bank financial firm L&T Finance Holdings’ retail net profit rose 176 per cent year-on-year to Rs 533 billion on the back of stable net interest margins and fees and lower borrowing costs, according to a press release.
Shares of L&T Finance Holdings rose 3% on July 20 after it managed to hit some of its FY26 targets in the first quarter of FY2024. Return on Assets (ROA) in retail exceeded Laksha’s GY26 target of 3%, and he stood at 3.08% in the June quarter.
The company announced on 19 July that its net profit for the first quarter of this year increased by 103% to Rs 531 million. Net profit for the same period last year was Rs.262 million.
The increase in net profit was due to stable net interest margins and lower borrowing costs, the company said. By 9:30 a.m., the stock was trading at 133 rupees, down 0.8 per cent from the previous closing, after reducing its opening gains. The stock is down about 6% from its 52-week high. L&T Finance’s cost of credit for the quarter was 2.6% for him. But analysts expected borrowing costs to drop even lower, at 2.4%, as the company transitions to a full retail portfolio.
NBFC’s retail asset quality improved sequentially, with a Tier 3 total asset ratio of 3.21% and a Tier 3 book value ratio of 0.70%. “We continue to focus on our digital efforts to maintain the momentum of retail growth,” said Motilal Oswal, a domestic brokerage firm. Borrowing costs are likely to ease in the short term due to further wholesale inventory reductions and improved retail asset quality, which could sustain retail ROA around 3%. ”

rapid retail deployment

The company achieved a retail ratio of 82% in the first quarter of 2024, significantly exceeding the Raksha 2026 target of 80% or more retail ratio. “In fact, we were able to achieve most of our goals almost three years ahead of schedule,” said Managing Director and CEO Dinanath Dubbashi.
Currently, the composition of the retail portfolio in L&T Finance Holdings’ portfolio is 82%, compared with 54% in the same period last year and 75% in the fourth quarter of fiscal year 2023.
In the quarter ended June, retail payments increased by 25% year-on-year to Rs.11.193 billion and retail inventories increased to Rs.64.274 billion. On the other hand, wholesale stocks fell by 65% ​​year-on-year to Rs 14.292 billion, showing an accelerated decline.
Morgan Stanley has an equal weight rating on the shares with a target price of Rs 105 per share. It was noted that the NBFC reported 2% of his PAT hits.
Analysts at Motilal Oswal will revise their forecasts after the company reports its results. They currently have a Buy rating on the stock with a price target of Rs 134. “It will be interesting to see if there will be any changes in strategy after the appointment of incoming CEO Sudipta Roy (ex-ICICI) to replace current MD and CEO Dinanath Dhabhasi,” said Motilal Oswal.