L&T Finance hits 52-week high on strong Q3 numbers; more upside in store?

L&T Finance Holdings hit a fresh 52-week high in the morning on January 16 after the company reported a 39 percent year-on-year (YoY) jump in consolidated profit at Rs 454 crore for the quarter ended December 31, 2022. Net interest income increased 23.5 percent year-on-year to Rs 1,931.8 crore in the said quarter.

At 12 pm, the stock was quoting at Rs 95.85 apiece, up 3.8 percent, after hitting a 52-week high of Rs 98.30 in early trade. Trading volumes at 32 million shares were over four times the 20-day average of 7.8 million.

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The company’s net interest margin (NIM) plus fees came at 8.80 percent, up 70 basis points (bps) YoY due to changing portfolio mix towards retail, the firm said on January 13.

The company also stated that it recorded its highest-ever quarterly retail disbursements at Rs 11,607 crore, up 53 percent YoY and up 13 percent sequentially.

“One-time provision of Rs 2,687 crore due to change in business model was created during the quarter to facilitate accelerated sell down of the wholesale book,” the management said in an exchange filing.

Foreign brokerage Goldman Sachs has a “buy” rating on the stock, with a target of Rs 108 a share. “Strong operational beat and earnings quality improves across board. We believe earnings will provide confidence that the company is on the path of improving profits,” the firm said. RoE is likely to touch 10.6 percent by FY24, it added. In Q2FY23, RoE was 8.44 percent.

Morgan Stanley has an equal-weight rating on the stock with a target price of Rs 95. “Higher re/pre-payments and sell-downs drove wholesale loans down faster. Profit before tax missed on higher provisions,” it said.

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