Motilal Oswal is bullish on Larsen and Toubro Finance Holdings has recommended buy rating on the stock with a target price of Rs 185 in its research report dated January 22, 2019.
Motilal Oswal's research report on Larsen and Toubro Finance Holdings
L&T Finance Holdings’ (LTFH) 3QFY19 PAT grew 81% YoY to INR5.8b, in line with our estimate, driven by strong AUM growth (+23% YoY), ‘retailization’ of the balance sheet, and improving asset quality. The company managed its liquidity situation well with a positive ALM gap of INR60b+ in a stress case scenario as on 31st Dec’18. LTFH has cash and liquid investments of INR42b (~4% of BS) and undrawn lines of INR110b+. LTFH has exposure to six SPVs of subsidiaries of IL&FS, of which one SPV paid its dues in Jan’19 (amount unknown). Three SPVs communicated that normal servicing of loans has been stayed by NCLAT, while the other two SPVs are yet to communicate to its lenders. However, management is confident of nil eventual credit losses from the IL&FS exposures.
Outlook
We remain confident that LTFH would continue to generate strong return ratios over the medium term. We keep our estimates as well as our TP unchanged. Maintain Buy with a TP of INR185 is based on 2.1x Dec 2020E BVPS.
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