L&T Finance shares were under pressure after global brokerage Morgan Stanley reiterated its Underweight rating on the stock, with a target price of ₹143, implying a significant 47% downside from the current market price of ₹271.36. The brokerage maintained a cautious stance, flagging concerns over valuation and a slower-than-expected return on equity (ROE) recovery.
Morgan Stanley said it remains cautious on L&T Finance, noting that the stock is trading at a next twelve-month (NTM) price-to-book value (P/BV) of 2.3x, which it considers expensive given the company’s moderate earnings growth outlook. The brokerage expects ROE improvement to remain gradual, constrained by compression in risk-adjusted net interest margins (NIMs) and return on assets (ROA) as the business continues to de-risk its portfolio.
According to Morgan Stanley, loan growth moderation amid overcapitalization is likely to limit profitability expansion in the near term. The firm pointed out that L&T Finance’s Q2FY26 ROE stood at 11.3%, still well below its cost of equity (COE), indicating subdued returns despite healthy capital adequacy.
The brokerage believes that while the company’s asset quality remains stable and capital buffers strong, the combination of slower credit growth, lower spreads, and premium valuations warrants a conservative approach.
Disclaimer: This article is for informational purposes only and not a recommendation to buy or sell any securities. Brokerage views are based on their respective research reports and publicly available information.