L&T Finance Holdings Research Report By IndiaNivesh

LTFH’s asset quality was affected significantly in past few quarters which have resulted in both lower margins and increase in provisioning expense. LTFH’s Q3FY15 result was 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 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. However recent correction in stock price gives opportunity to enter the stock at reasonable valuations of 1.5x FY16E ABV which is much lower than industry multiple of ~2.0-2.5x for FY17E.

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