L&T Finance Share Price Surge 3% to ₹189 on 29% Profit Increase in Q1FY25

L&T Finance share price surged nearly 3% to ₹189 per share on July 18 following the announcement of a 29% year-on-year increase in consolidated net profit, reaching ₹685 crore for the quarter ending in June (Q1FY25). At 09:56 PM IST, L&T Finance shares were trading 0.71% higher at ₹185.55 each, while the BSE Sensex saw a 0.11% increase, trading at 80,808 points.

This year, L&T Finance share price have risen over 11%, compared to a 12% rise in the benchmark Nifty 50. The stock hit a 52-week high of ₹194 per share on July 4, 2024. Over the past week, L&T Finance delivered a 0.18% return, 10.06% over the last six months, and 11.69% year-to-date. The company’s market capitalization stands at ₹45,952.79 crore, with a 52-week high/low of ₹194.25 and ₹116.5 respectively.

The significant profit increase for Q1FY25 was driven by robust net interest margins (NIM) and fee income, with net profit rising to ₹686 crore from ₹531 crore in the same quarter the previous year. Net interest income (NII) grew by 23% to ₹2,020 crore, up from ₹1,644 crore the previous year. NIM, including fees and other income, improved by 144 basis points to 11.08% from 9.64% in Q1FY24.

L&T Finance also reported improved asset quality, with gross non-performing assets (NPAs) dropping to 3.14% in Q1FY25 from 4.04% in Q1FY24. The farmer finance sector saw disbursements increase by 8% to ₹1,903 crore, with the outstanding book growing by 8% to ₹14,204 crore from ₹13,125 crore a year ago.

The consolidated loan book size grew by 13% year-on-year, reaching ₹88,717 crore at the end of June 2024, compared to ₹78,566 crore a year earlier. Selling, general, and administrative expenses rose by 3.71% quarter-on-quarter and increased by 27.81% year-on-year. Operating income fell by 2.31% quarter-on-quarter but rose by 8.76% year-on-year. The EPS for Q1 was ₹3.9, a 24.21% year-on-year increase.

In the Rural Business Finance segment, L&T Finance recorded a 28% year-on-year rise in disbursements, totalling ₹5,773 crore in Q1FY25. Additionally, the outstanding book in this segment grew by 31% year-on-year to ₹25,887 crore by June 2024. Gross NPAs in this segment also improved, declining to 3.14% in Q1FY25 from 4.04% in Q1FY24.

The company attributed its growth to expanding customer acquisition both horizontally into new locations and vertically by increasing its customer base in existing locations.

Following these results, analysts at Citi maintained a 'buy' rating on L&T Finance with a target price of ₹221 per share, indicating a potential 20% upside from current levels.

As of July 18, 2024, among 16 analysts covering the company, 1 recommended 'Strong Sell,' 1 'Sell,' 6 'Buy,' and 8 'Strong Buy.' The consensus recommendation was to 'Buy.'

"The broad-based retail assets under management (AUM) grew by 31% year-on-year in the quarter ending June. Gross stage-2 and stage-3 credit costs were contained during a seasonally weak quarter. NIMs, including fees, remained above 11%, while operating expenses relative to assets improved," noted the brokerage firm.

L&T Finance Ltd, previously known as L&T Finance Holdings Ltd (LTFH), is a subsidiary of Larsen & Toubro Limited. It is a non-deposit-taking and non-banking financial company that provides a range of lending solutions. The company offers financing for two-wheelers, consumer goods, homes, farm equipment, women entrepreneurs, rural groups, real estate, and infrastructure. Additionally, it provides financing solutions for small and medium enterprises through term loans and overdraft facilities, as well as loans against property, business loans, and professional loans. LTFH has a presence in major cities, urban, and semi-urban areas across India and is headquartered in Mumbai, Maharashtra.