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Prabhudas Lilladher Report
L&T Finance Holdings Ltd.'s Q2 FY22 earnings (PAT at Rs 2.2 billion stood below estimates; PLe: Rs 3.5 billion) disappointed on multiple fronts:
1. Elevated net losses on fair changes (DHFL bonds, sell downs in real estate account).
2. Tepid growth traction (AUMs declined 12%/2% YoY/QoQ).
3. Lower provisions (PCR down 13bps QoQ to 52%).
4. No improvement in asset quality (5.74% vs 5.75%: Q1 FY22; housing NPAs jumped 458 bps QoQ led by Rs 13 billion RE account that forms 10% of overall RE exposure.
Near term growth looks somber and we trim growth estimates to 5%/10% (earlier 11%/13%) and tweak provisions estimates higher to 290 bps (earlier 250 bps) over FY22/23.
As asset quality vulnerability persists, return ratios to take a toll (expect <10% RoE by FY24). Consequently, our EPS estimates stand down by average 25% over FY22-24E.
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