L&T Finance Holding Ltd. | Q3FY15 Result Update | Better than expected results on all fronts… maintain buy with upwards revised target price of Rs 84… IndiaNivesh

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Valuation:
LTFH’s results were ahead of expectation on operating front with higher than
expected growth in loan book and Net interest income. Asset quality was stable on
consolidated level while it was deteriorated in L&T Finance mainly due to
seasonality. We believe LTFH is set for gradual recovery in both business growth
and asset quality led by improvement in macros. At CMP of Rs 69, LTFH is trading
at consolidated P/AVB of 1.5x and 1.3x for FY16E and FY17E respectively. We continue
to maintain buy rating on the stock with target price of Rs 84, valuing at 1.5x FY17E
ABV.

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L&T Finance Holding’s (LTFH’s) Q3FY15 results were ahead of our expectation on all
fronts with Consolidated Net Interest income growth of 42% yoy to Rs 6.8 bn led by
20% yoy growth in loan book and decline in cost of funds. Consolidated Operating
profit growth was much ahead of expectation at Rs 4.9 bn led by higher other
income of Rs 340 mn and control over operating expense with increase of 9% yoy.
Net profit was at Rs 1.8 bn as against expectation of Rs 1.6 bn. Asset quality on
consolidated basis was stable at 3% Gross NPA and 2% Net NPA, Asset quality in
infra financing improved by 23 / 19 bps qoq in Gross / Net NPA while in retail
financing deteriorated with increase of 40 / 16 bps respectively. However improving
provision coverage at consolidated level to 35% drives comfort. With improving
macros and operating performance of LTFH, Valuations at 1.5x and 1.3x at
consolidated P/ABV looks attractive. Maintain buy rating on the stock with upwards
revised target price of Rs 84, rolling over multiple to 1.6x for FY17E ABV.
Result update
Infra and Housing financing business drives Loan book:
LTFH’s loan book growth was ahead of our expectation at 20% yoy led by higher
growth in L&T Infra by 30% yoy and Housing Finance by 88% yoy (due to low base).
L&T Finance (retail financing subsidiary) reported loan growth of 5% yoy mainly
due to lower growth in Corporate, construction equipment and commercial vehicles.
Consolidated disbursements grew by 46% yoy to Rs 93.8 bn.
Loan Book (Rs mn) % of total Q3FY15 Q3FY14 % YoY Q2FY15 % QoQ
L&T Finance Hldg (Cons) 100.0 452250 378204 19.6 427600 5.8
L&T Infra 47.9 216590 166450 30.1 196600 10.2
L&T Finance 45.6 206190 196084 5.2 206360 ‐0.1
Housing Finance 6.5 29470 15670 88.1 24640 19.6
Disbursements (Rs mn) % of total Q3FY15 Q3FY14 % YoY Q2FY15 % QoQ
L&T Finance Hldg (Cons) 100.0 93780 64223 46.0 76850 22.0
L&T Infra 44.4 41600 13360 211.4 32200 29.2
L&T Finance 49.1 46050 47520 ‐3.1 39770 15.8
Housing Finance 6.5 6130 3343 83.4 4880 25.6
Source: Company, IndiaNivesh Research
L&T Infra’s loan book grew by 30% yoy led by growth in disbursement to operating
projects in renewable and road segment and also due to higher growth in non infra
segment. Operation projects now constitute 46% of loan book as against 43% in
Q2FY15.

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