L&T Finance Holding Ltd – Q3FY13 result update - IndiaNivesh

Healthy loan growth has come in at a cost of Asset quality... Stretched valuation leaves limited upside... maintain HOLD with target price of Rs 81...

- LTFH's loan book growth remains robust at 31% yoy (13% qoq). L&T infra finance (LTIF) registered a higher loan growth comparatively at 48% yoy (10% qoq) while L&T Finance (LTF) of 29% yoy (14% qoq). Disbursements grew by 22% yoy to Rs 66.6 bn backed by healthy disbursals in LTIF.

- Asset quality (cons) deteriorated with increase of 58 / 32 bps qoq in Gross / Net NPA to 2.4% / 1.6%. LTIF's Gross / Net NPA increased by 29 / 23 bps qoq to 1.8% / 1.6% and LTF by 47 / 58 bps qoq to 2.1% / 1.6%.

- NIMs (cons) surprised negatively with decline of 12 bps qoq to 5.3% mainly due to higher decline in yields as against cost of funds. NII (cons) was ahead of expectation at Rs 3.8 bn, increase of 25% yoy.

- Net profit jumped by 215% yoy to Rs 2.9 bn due to one off (sell of investment in federal bank), however adjusted net profit growth was lower than expected at 27% yoy.

LTFH's Q3FY13 results were disappointing on margins and asset quality front, however loan book momentum remains intact driven by sequential increase in disbursals in both financing subsidiaries. NIMs surprised negatively with contraction of 12 bps as against our expectation of stable margins mainly due to decline in yields higher than that of contraction in cost of funds. Asset quality deteriorated with increase in delinquencies however aggressive provisioning remains a key positive.

At CMP of Rs 85, the stock is trading at P/ABV of 2.9x and 2.6x for FY13E and FY14E respectively. We maintain HOLD on stock target price of Rs 81.

Source : Equity Bulls

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