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MOSL: Morning India (23/May/18): 1. SBI; 2. IOCL; 3. Bosch; 4. HPCL; 5. Ashok Leyland; 6. Cipla; 7. Bharat Forge

MOrning India (23/May/18): 1. SBI; 2. IOCL; 3. Bosch; 4. HPCL; 5. Ashok Leyland; 6. Cipla; 7. Bharat Forge

 

Today’s top research idea

State Bank of India: Credit cycle coming to an end; earnings to gain traction over FY19/20

• SBIN reported a loss of INR77.2b, with slippages spiking up to INR336.7b (INR174.35b from known stressed book), even as total revenue exceeded our estimate by 9%. The size of watch-list declined to INR258b (including corporate SMA-2 and stressed SMA-1 advances). Also, excluding one telecom slippage, ~78% of total corporate slippage occurred from the stressed pool, resulting in a decline in gross stressed assets. For FY18, SBIN reported a loss of INR65.5b v/s profit of INR2.41b in FY17.
• Loan growth recovered to 3.5% YoY (+6% QoQ), aided by a sharp sequential pick-up in the large- and mid-corporate portfolio, while retail advances growth stood at a healthy 14% YoY (+5% QoQ). Margin improved 5bp QoQ to 2.5%, aided by moderation in funding cost (5% YoY decline in interest expenses) and continued progression in the CASA mix (57bp QoQ increase to 45.7%). SBIN guided for 10% advances growth in FY19.

Piping hot news

NCLAT puts Essar Steel insolvency process on hold

• The National Company Law Appellate Tribunal (NCLAT) on Tuesday directed the insolvency resolution professional and committee of creditors (CoC) for Essar Steel Ltd as well as National Company Law Tribunal’s (NCLT) Ahmedabad bench to not pass any order, including an order of liquidation, with respect to Essar Steel’s insolvency. This order effectively puts the corporate insolvency process for debt-ridden Essar Steel on hold.