L&T Finance Holdings
Estimate change
TP change
Rating change
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19 July 2021
1QFY22 Results Update | Sector: Financials
CMP: INR91
TP: INR110 (+22%)
Buy
Transient impact of COVID 2.0; recovery held up well in Jun’21
LTFH reported a 1QFY22 PAT of INR2.7b (35% miss). Additional COVID-19
provisions stood at INR3.7b in 1QFY22. It further restructured INR9.8b
under OTR 2.0. While NII was broadly in line, lower other income, and
higher opex (up 31% YoY) led to a PAT miss.
Loan book fell ~11% YoY in 1QFY22, driven by a QoQ decline in Micro
loans, 2W finance, and Real Estate finance.
Even though LTFH has accounted for most of the asset quality pain, there
will be a moderation in AUM growth and consequent higher cost ratios.
We cut our FY22E/FY23E EPS estimate by 21%/19%. We maintain Buy with
a TP of INR110 per share (1.2x FY23E BVPS).
Disbursements fell 36% QoQ to INR52.2b. In May’21, disbursements were
impacted across product segments, except Infrastructure. Tractors
continued to witness robust demand, with a 9% QoQ growth, and
supported overall rural disbursements, even as 2W and ML disbursements
were impacted by lockdown/collection constraints.
Disbursements in Home Loans/LAP/Real Estate remained muted, with
continued conservatism in financing the SENP segment and no new
sanctions in Wholesale Real Estate lending.
Despite decent disbursements in the Wholesale/Infra segment, the
corresponding loan book fell ~11% QoQ because of strong collections
through sell downs and repayments/prepayments.
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Financials & Valuations (INR b)
Y/E March
2021 2022E
Total Income
71.1
70.7
PPP
51.3
47.4
Adj. PAT
9.5
14.5
EPS (INR)
3.8
5.9
EPS Gr. (%)
-54.7
53.1
BV/Sh. (INR)
76
81
Ratios
NIM (%)
6.6
6.8
C/I ratio (%)
27.8
32.9
RoAA (%)
0.9
1.4
RoE (%)
5.7
7.5
Payout (%)
0.0
12.0
Valuation
P/E (x)
23.7
15.5
P/BV (x)
1.2
1.1
Div. Yield (%)
0.0
0.8
Shareholding pattern (%)
As On
Jun-21 Mar-21
Promoter
63.6
63.6
DII
6.6
5.9
FII
8.8
10.6
Others
21.1
19.9
FII Includes depository receipts
LTFH IN
2,469
223.7 / 3
113 / 52
-1/-16/16
1428
Disbursements impacted in May’21, the situation improved in Jun’21
2023E
75.5
48.9
20.3
8.2
39.6
88
7.0
35.2
1.9
9.7
12.0
11.1
1.0
1.1
Jun-20
63.7
5.5
9.4
21.5
Housing collections most impacted; LTFH again building up a provision buffer
Collection efficiency across product segments showed a lot of promise
after the lifting of lockdown restrictions post the second COVID wave.
Collections (focused business) fell ~5% QoQ to INR132b. Collections were
strong in Infrastructure, decent in rural, but Housing Finance collections
were impacted the most (down 37% QoQ).
LTFH reversed INR7b of COVID-related provisions in 4QFY21. To guard
against contingencies, it made additional provisions of INR3.7b in 1QFY22.
Total additional provision buffer stood at INR14b (1.6% of loans).
GNPL ratio increased by ~80bp QoQ and stood at 5.75%. PCR on Stage 3
assets declined by 400bp to 65.4%. Rural Finance continued to exhibit a
deterioration and the respective GS3 stood at 4.4% (up 40bp QoQ).
Spreads stable; margin sees a QoQ decline; AMC AUM exhibited growth
Spreads (calculated) were stable QoQ at 6.2% as the marginal decline in
blended yields was mitigated by a similar benefit in CoF. NIM (healthy
nonetheless) exhibited a QoQ decline of ~20bp due to the negative carry
from higher liquidity.
Average AUM in the AMC was up 4% QoQ to INR755b, led by a 5% increase
in equity AUM. PAT stood at INR470m in 1QFY22 (v/s INR560m QoQ).
Key highlights from the management commentary
The management’s focus will be on retailization of its book going forward.
It expects NIM + fees to continue its current healthy trajectory.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Research Analyst: Alpesh Mehta
(Alpesh.Mehta@MotilalOswal.com)
| Abhijit Tibrewal
(Abhijit.Tibrewal@MotilalOswal.com)
Research Analyst: Nitin Aggarwal
(Nitin.Aggarwal@MotilalOswal.com)|
Divya Maheshwari
(Divya.Maheshwari@Motilaloswal.com)
17 July 2020
1