MOSL: Morning India (18/October/19): 1. SBI (Earnings set to revive amidst uncertain macros); 2. Motherson Sumi FY19 (ART); 3. Zee Entertainment; 4. TVS Motor Co; 5. L&T Infotech; 6. Utilities
MOrning India (18/October/19): 1. SBI (Earnings set to revive amidst uncertain macros); 2. Motherson Sumi FY19 (ART); 3. Zee Entertainment; 4. TVS Motor Co; 5. L&T Infotech; 6. Utilities
Today’s top research idea
SBI: Earnings set to revive amidst uncertain macros
- SBIN's earnings were suppressed for the past several years due to issues pertaining to asset quality, merger, etc. Currently too, the macro environment remains challenging with new names being added to the stressed pool. However, given SBIN's size, the new stress is manageable (~2% of total loans) in our opinion. Moreover, we believe that SBIN is well poised for an earnings recovery led by steady operating performance at the PPOP level, recoveries from NCLT resolutions and normalization in credit cost to 1.9%/1.3% over FY20E/FY21E.
- SBI's subsidiaries have displayed robust performance over the last few years. We note that at CMP, its subsidiaries account for ~35% of total valuation with the bank trading close to its lowest valuation (0.7x FY21E ABV).
- SBIN's stock price has corrected 29% over the past three months, which provides favorable risk-reward, in our view. We conservatively expect RoA/RoE to improve to 0.7%/12.7% by FY21 and maintain our TP of INR350. Maintain Buy.
Piping hot news
IL&FS completes wind power units sale to Orix for RS 4,800 crore
Bankrupt infra major IL&FS on Thursday completed the sale of its 51 percent stake in seven wind power special purpose vehicles to Orix Corporation of Japan for Rs 4,800 crore. With this, Orix, which previously owned 49 percent in each of these seven projects, now has 100 percent ownership, the company said in a statement.
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