UBS has downgraded its rating on the stock to “neutral” from its earlier rating of “buy” but has raised its price target from ₹177 to ₹210 apiece, implying an upside potential of 16.3% from Thursday’s closing price.
UBS said it sees risk-reward being evenly balanced for L&T Finance after the recent run-up seen in the stock.
Shares of L&T Finance have risen 39% in the last three months and UBS believes that the stock already prices in an improvement in the overall business, particularly in the Micro Finance (MFI) segment.
L&T Finance’s valuation has re-rated to 1.7 times its one-year forward price-to-book, which is higher, in comparison to its last five-year average of 1.2 times, leaving little scope for any disappointment in numbers, UBS wrote in its note.
UBS expects L&T Finance’s loan book to grow at a Compounded Annual Growth Rate (CAGR) of 20% over financial year 2025 and 2027, with the share of MFIs declining to 24% from 27% earlier.
Margins for L&T Finance are likely to remain rangebound and credit costs are likely to remain around 2.4% to 2.5%, which would limit the improvement in Return on Assets (RoA) and Return on Equity (RoE), the note said.
L&T Finance is ramping up its new digital initiatives with results likely to be visible in the second half of FY26, UBS said.
The brokerage said it will closely monitor the company’s credit outcomes of new initiatives for turning constructive again. It expects L&T Finance’s EPS to grow at a 16% CAGR over financial year 2025-2027 and RoE to grow by 13% during the same period.
Of the 20 analysts that have coverage on the stock, 12 have a “buy” rating, three have a “hold” rating, and five have a “sell” recommendation on the stock.
Shares of L&T Finance declined 3.8% to hit an intraday low of ₹180.61 apiece on Friday, June 13. The stock was down 1.56% at ₹184.87 apiece at 10.25 am. It has gained 34.2% this year, so far.
Also Read: Stock Market Plunge: Genus Power block deal worth ₹650 crore called off, sources say
