Morgan Stanley has retained its ‘Underweight’ rating on L&T Finance Holdings (LTFH) with a target price of ₹112, implying a 22% downside from the current market price (CMP) of ₹144.40. Here’s the breakdown of the brokerage’s observations:
Key Highlights:
- Q3FY25 PAT Performance:
- LTFH reported a profit after tax (PAT) of ₹6.3 billion, 9% above estimates.
- MFI Provisions Utilized:
- L&T Finance dipped into its macroprudential provisions for the microfinance (MFI) segment, utilizing ₹1 billion out of the ₹9.75 billion provisions during Q3.
- The company has guided further utilization of ₹3-3.5 billion in Q4FY25.
- Retail Slippages and Collections:
- Retail slippages improved quarter-on-quarter but remained elevated.
- MFI business collections showed improvement in December; however, they stayed at higher levels.
- Retail AUM Growth:
- Retail assets under management (AUM) grew 23% YoY in Q3FY25, a slight moderation from earlier levels.
- The brokerage expects this growth to further moderate to 20% YoY in FY25 estimates.
Concerns Highlighted:
- Elevated slippages and tepid collections in the MFI segment continue to be a challenge.
- Utilization of macroprudential provisions indicates lingering stress in specific business verticals.
Morgan Stanley has flagged concerns over LTFH’s elevated MFI risks and moderating growth trajectory in its retail book. The firm’s target price of ₹112 reflects a cautious stance, driven by these underlying challenges.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Investors are advised to consult their financial advisor before making any investment decisions.