L and T Finance Limited: A Stock to Buy Now with 20%+ Upside Potential
L and T Finance Limited (LTFH), a prominent player in India’s Non-Banking Financial Company (NBFC) sector, has recently attracted considerable attention in the stock market, especially after a bullish research report by Motilal Oswal. With a market capitalization of Rs. 35,020 Crore, LTFH’s stock has been moving up and is showing strong potential for an upside of over 20% in the coming months. Investors and analysts alike are increasingly confident about the company’s prospects, driven by robust growth, strategic business expansion, and positive market sentiments.
Stock Overview and Recent Price Movement
L&T Finance’s stock opened at Rs. 137.75, marking a 0.82% decline from the previous day’s close. However, the stock bounced back, hitting a high of Rs. 140.90, reflecting a 1.43% increase from its opening price. With its current valuation and promising future growth prospects, LTFH remains a stock to watch closely in the upcoming quarters.
Investment Rationale: Target Price and Growth Outlook
Motilal Oswal’s research report indicates a target price of Rs. 170 for L&T Finance’s stock, representing an upside potential of approximately 21.42% from the current levels of Rs. 140. This projection is based on a detailed evaluation of the company’s strong fundamentals and the successful execution of its growth strategies.
L&T Finance has demonstrated remarkable resilience in the current Microfinance Institution (MFI) credit cycle, when many of its peers are grappling with challenges. The company has managed to maintain robust asset quality, positioning itself as a key player in the sector. Additionally, LTFH is well-equipped to weather challenges such as Karnataka’s new loan recovery rules and the implementation of MFIN Guardrails 2.0, which may affect other players in the space.
Strategic Expansion Plans and New Business Initiatives
L&T Finance recently made a significant announcement regarding its foray into the gold loan business with the proposed acquisition of Paul Marchants Finance. This acquisition will expand the company’s secured retail portfolio, further enhancing its presence in 11 states and 130 branches. The gold loan business is expected to begin contributing positively to LTFH’s bottom line by FY26, as the company extends its footprint to new geographies and serves an expanding customer base of over 98,000.
In addition to the gold loan business, LTFH is also ramping up its use of artificial intelligence (AI) and machine learning (ML) to improve operational efficiency. The company is leveraging these technologies for predictive risk analysis, credit evaluation, and scaling up its personal loans business, which had previously been slowed down. This forward-thinking approach positions LTFH as an industry leader in digital innovation, giving it an edge over competitors.
Strong Financials and Future Projections
L&T Finance has delivered solid financial performance over the years, with a reported 15.95% year-on-year (YoY) increase in revenue from Rs. 3,534 Crore in Q3FY24 to Rs. 4,098 Crore in Q3FY25. While net profit saw a slight dip of 2.03% YoY, from Rs. 639 Crore to Rs. 626 Crore, the company continues to show resilience amid macroeconomic uncertainties.
Broker estimates suggest a loan compound annual growth rate (CAGR) of approximately 21% and a profit after tax (PAT) CAGR of around 22% from FY24 to FY27. By FY27, LTFH is expected to achieve a return on assets (ROA) of 2.7% and a return on equity (ROE) of approximately 14%.
Key Financial Ratios
Here are some key financial metrics that can help investors assess the company’s valuation and potential:
| Financial Ratios | Values |
|---|---|
| Market Cap | ₹35,020 Crore |
| Current Price | ₹140 |
| Stock P/E | 13.6 |
| Book Value | ₹97.3 |
| Dividend Yield | 1.79% |
| ROCE | 8.22% |
| ROE | 10.3% |
| Face Value | ₹10 |
| Promoter Holding | 66.2% |
| Price to Book Value | 1.44 |
| Debt to Equity | 3.50 |
| Pledged Percentage | 0.00% |
| Industry P/E | 20.2 |
| Graham Number | ₹150 |
| Intrinsic Value | ₹91.1 |
| RSI | 50.2 |
| EPS | ₹10.3 |
| No. of Eq. Shares | 249 Million |
| PEG Ratio | 17.9 |
| DMA 200 | ₹151 |
| Free Cash Flow (3Yrs) | ₹13,179 Crore |
| Free Cash Flow (FY) | ₹555 Crore |
| Debt | ₹84,985 Crore |
| Free Cash Flow (5Yrs) | ₹20,702 Crore |
| Return on Assets | 2.22% |
Conclusion
L&T Finance Limited offers a compelling investment opportunity, with significant upside potential driven by its strong financial performance, strategic business expansions, and technological advancements. The company’s entry into the gold loan sector, along with its digital transformation initiatives, promises to add new streams of revenue, further boosting shareholder value. With a favorable growth outlook, an attractive target price of Rs. 170, and an upside potential of 21%, L&T Finance’s stock is certainly worth considering for investors looking for growth stocks with substantial long-term value.
If you’re looking for a promising NBFC stock with a solid growth trajectory and potential for over 20% upside, L&T Finance Limited is one to keep on your radar.
For more market insights, follow our news.
Stay tuned for more updates and insights on the stock market! For more insights on investing in the Indian stock market, check out resource like ET, NSE India.
Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Investors should conduct thorough research and consult with a qualified financial advisor before making any investment decisions.