EUR 120.00 For Business Accounts Only

MOSL: Morning India (13/May/19): 1. SBI (Asset quality concerns abating; earnings set to normalize hereon); 2. Larsen & Toubro; 3. Titan Company; 4. Avenue Supermart; 5. Tata Steel; 6. Eicher Motors; 7. GSK Con

MOrning India (13/May/19): 1. SBI (Asset quality concerns abating; earnings set to normalize hereon); 2. Larsen & Toubro; 3. Titan Company; 4. Avenue Supermart; 5. Tata Steel; 6. Eicher Motors; 7. GSK Consumer; 8. Dalmia Bharat; 9. EcoScope

 

Today’s top research idea

SBI: Asset quality concerns abating; earnings set to normalize hereon

• SBIN reported PAT of INR8.4b dragged by higher provisions of INR165b. NII increased 15% YoY to INR229.5b, driven by strong loan growth of 13% YoY. Domestic NIM expanded 5bp QoQ to 3.02%. Slippages moderated to INR79.6b, which, coupled with healthy recoveries and higher write-offs, drove an 8.0%/18.6% QoQ decline in GNPL/NNPL.
• The credit cycle is showing signs of a recovery, as evident in the declining size of SMA-1 & 2 accounts (INR77.6b - 0.4% of advances). Steady trends in the core portfolio, along with healthy recoveries/write-backs via NCLT (SBIN suggested for write-backs of INR160b), will likely drive a further improvement in asset quality over FY20/21. Almost every lever of earnings is turning in favor of a big rebound after a dismal four-year earnings holiday. We value the stock at 1.2x P/ABV and arrive at a TP of INR380. The stock is primed for a further re-rating as the credit cost curve keeps shifting down.

Piping hot news

IIP at a 21-month low as manufacturing slows down

• Growth in industrial activity dipped to a 21-month low in March, contracting 0.1% due in large part to a continuing slowdown in the manufacturing sector, according to official data released on Friday. The Index of Industrial Production (IIP) contracted in March for the first time since June 2013. To further put this contraction in perspective, the IIP grew a robust 5.33% in the same month of last year, and 4.39% in March 2017.