MOSL: Morning India (1/March/18): 1. AU Small Finance; 2. EcoScope (GDP); 3. NBFC; 4. Rain Industries

MOrning India (1/March/18):

Today’s top research idea
AU Small Finance Bank: Perfect start to a promising journey; Upgrading to Buy
** AUBANK has reported strong progress as it undertakes transitioning from a leading retail-focused NBFC (AU Finance) to a small finance bank (SFB).

** The bank continues to record robust balance sheet growth and has also surprised positively in terms of liability franchise development, which should provide cushion against a decline in yields.

** We expect 42% earnings CAGR over FY18-20E, driving RoA/RoE to 1.98%/20.1% in FY20E.

** Post the recent correction, the stock trades at 4.9x FY20E BV and 27x FY20E EPS. In view of its long-term sustainable business and earnings growth potential, we believe that AUBANK should continue trading at a premium. We thus upgrade the stock to Buy with a target price of INR705 (unchanged), based on 5.9x FY20E BV/32.7x FY20E EPS.

Piping hot news
Britannia shifts focus to direct supply, to operate with zero-day inventory
** Britannia Industries Ltd is adapting the “leanest possible” distribution model to directly “tailor-serve retail outlets” across the country in less than a day as part of its plan to multiply sales and expand retail reach, said a senior executive. Currently, the process takes between one and three weeks.