Emkay Global Sees Upside in Larsen and Toubro Finance, Sets Target Price at Rs 330

Larsen and Toubro Finance Reports Strong Quarter, Adjusts Estimates

Larsen and Toubro Finance (LTF) has reported a robust performance across key parameters, with the company scaling significantly as a retail franchise. The asset under management (AUM) has reached approximately Rs1.2 trillion, driven by strong disbursements across various segments and record profitability. Notably, the company has maintained stable margins and improved asset quality, while also pointing to sustained growth of >20%.

The management commentary highlights the company's focus on maintaining a stable net interest margin (NIM) of 10–10.5% and fees, while reducing credit costs to a range of ~2–2.2%. This is expected to support a gradual improvement in return on assets (RoA) to ~2.8% in the near term and >3% over the medium term. The key driver behind this growth is LTF's tech-led underwriting and portfolio management stack, which has helped reduce slippages and improve risk selection.

In addition to its technology-driven approach, LTF has also continued to invest in distribution, particularly in gold loans and rural segments, which is expected to drive operating leverage over time. The company has also revealed its 'Lakshya 2031' roadmap, aiming to achieve 20% AUM compound annual growth rate (CAGR), credit costs at or below 2%, and profitability metrics of 3–3.2% RoA and 16–18% return on equity (RoE). The execution of this roadmap is expected to be driven by AI-led underwriting, granular expansion, and product diversification.

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Estimate Adjustments

In light of LTF's recent performance and outlook, Emkay Global Financial has adjusted its estimates, resulting in a 1-2% increase in FY27-28E earnings per share (EPS). The research firm maintains a BUY rating and a target price of Rs330, implying a price-to-book (P/B) ratio of 2.4x for FY28E.

Note: The table above presents a comparison of Emkay Global Financial's revised estimates for FY27-28E EPS for Larsen and Toubro Finance.

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