LTF - Fundamental Analysis: Financial Health & Valuation

Last Updated Time : 20 Dec 25, 11:15 pm

Fundamental Rating: 3.8

📊 Core Financials

• Quarterly PAT increased from ₹694 Cr. to ₹728 Cr. (+5.6% growth).
• ROE at 10.8% is modest, while ROCE at 8.7% indicates average efficiency.
• Debt-to-equity ratio at 3.76 is high, typical for NBFCs but adds leverage risk.
• EPS at ₹10.7 supports profitability, though margins remain moderate.

💹 Valuation Indicators

• P/E Ratio: 28.2 (above industry PE of 21.2, suggesting premium valuation).
• P/B Ratio: ~2.9 (CMP ₹301 / Book Value ₹104).
• PEG Ratio: 0.22 (very attractive, indicating undervaluation relative to growth).
• Intrinsic Value: CMP appears close to fair value, offering moderate margin of safety.

🏢 Business Model & Competitive Advantage

• L&T Finance operates as a diversified NBFC with focus on retail, rural, and infrastructure financing.
• Competitive advantage lies in strong parentage (L&T Group), diversified loan book, and rural penetration.
• Digital adoption and focus on retail lending enhance long-term sustainability.

📈 Entry Zone & Long-Term Guidance

• Entry Zone: Attractive near ₹260–₹280 (close to DMA 200 at ₹231 and below CMP).
• Long-Term Holding: Suitable for investors seeking NBFC exposure, though leverage and modest ROE warrant caution.

✅ Positive

• Quarterly PAT growth of +5.6% shows earnings momentum.
• PEG ratio at 0.22 highlights undervaluation relative to growth.
• FII (+0.21%) and DII (+0.23%) holdings increased, showing investor confidence.

⚠️ Limitation

• High debt-to-equity ratio (3.76) adds financial risk.
• ROE at 10.8% and ROCE at 8.7% are modest compared to peers.
• P/E ratio (28.2) is above industry average (21.2).

📉 Company Negative News

• High leverage remains a structural risk for NBFC operations.
• Profitability sensitive to interest rate cycles and credit quality trends.

📈 Company Positive News

• Quarterly PAT rose to ₹728 Cr. from ₹694 Cr.
• Institutional investors increased holdings, reflecting confidence in growth trajectory.

🏭 Industry

• NBFC sector benefits from credit demand, rural financing, and infrastructure growth.
• Industry PE at 21.2, showing LTF trades at a premium to peers.

🔎 Conclusion

L&T Finance shows steady profitability growth and strong parentage support, but valuations are slightly premium with modest ROE and high leverage. Entry is advisable near ₹260–₹280 for better risk-reward. Long-term investors may benefit from NBFC sector growth, though cautious accumulation is recommended due to leverage risks and moderate efficiency metrics.