Sharekhan Recommends To Buy This Stock For 61% Upside

Renowned brokerage firm Sharekhan has recommended buying the stocks of L&T Finance Holding Ltd. (LTFH) Hence for its potential upside, based on promising performance. LTFH has been rated AAA by CARE and CRISIL.

Target Price

The Current Market Price (CMP) of L&T Finance Holding Ltd. (LTFH) is Rs. 77. The brokerage firm, Sharekhan Recommends has estimated a Target Price for the stock at Rs. 121. Hence the stock is expected to give a 61% return, in a Target Period of 1 year. Sharekhan thinks, "LTFH is a structural play on the credit growth story of India with rural credit displaying green shoots, recovery in housing sales, and continued government spending in infrastructure projects."

Stock Outlook
Current Market Price (CMP)	Rs. 77
Target Price	Rs. 121
1 Year returns	61.00%

Company performance

L&T Finance Holding Ltd. (LTFH)'s net interest income stood at Rs. 5,905 crore in FY 21, which is expected to grow at Rs. 6,427 crore in FY 24. The company's PAT stood at Rs. 949 crore in FY 21, which is expected to grow at Rs. 1371 crore in FY22. LTFH's disbursement recovered q-o-q to Rs. 73.3 billion, (up ~3% y-o-y and up ~41% q-o-q), aided by rural finance, which constitutes 68% of the total disbursement. The company's Rural finance continued to provide support to the overall loan book with farm equipment growing by around 21% y-o-y, and two-wheeler increasing ~3% y-o-y. Collection efficiency (CE) reached to pre-Covid levels across retail products, while capital adequacy improved to 25.2% in September 2021 with Tier-1 at 20.1%.

Comments by Sharekhan

According to Sharekhan, "LTFH is expected to reap the benefits of pick up in credit demand in the economy. As per industry estimates, housing sales have increased by 12% to 1,38,051 units during January-September 2021. Driven by pent-up demand and gradual recovery in the overall economy along with benign interest rates, housing sales are likely to increase by 15% to 20% going ahead. Likewise, continued government spending in infrastructure projects is expected to bode well for LTFH's lending business in the long term. With this divestment, LTFH would be able to strengthen its balance sheet to augur future growth in the lending business. The company is well capitalized to support its long-term growth. Its capital adequacy improved to 25.2% in September 2021 with Tier-1 at 20.1%."

About the company

LTFH offers a wide range of financial products and services, which is among the largest NBFCs in India with a loan book of around Rs. 89,000 crore and with 700+ points of presence across 24 states. The company's parent is one of the leading infrastructure players in the country, which not only helps LTFH with access to pertinent industry information but also with the ability to leverage the parent's strength in business as well as ratings. The company operates in retail/wholesale lending, as well as across two-wheeler finance, tractor finance, micro-finance, home loans/LAP, builder finance, infra finance, and structured finance among other product lines.

Disclaimer

The above stock was picked from the brokerage report of Sharekhan. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.