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MOSL: Morning India (24/August/18): 1. RBL Bank (The twin earning boosters); 2. Larsen & Toubro (Board approves buyback); 3. EcoKnowledge; 4. Voices | India Inc on Call (Demand improvement visible); 5. TVS Moto

MOrning India (24/August/18): 1. RBL Bank (Credit cards & MFI - The twin earning boosters); 2. Larsen & Toubro (Board approves buyback proposal); 3. EcoKnowledge; 4. Voices | India Inc on Call (Demand improvement visible); 5. TVS Motor

 

Today’s top research idea

RBL Bank: Credit cards & MFI - The twin earning boosters

• RBL has demonstrated strong progress in building its credit card portfolio and we expect the growth momentum to remain strong thus driving up the mix of credit cards/MFI segment to ~25% of total loans by FY21E.
• As per our base case these businesses will account for ~33% of total PAT by FY21E (vs 21% currently) leading to RoA of 1.5%. With a diverse product portfolio, no legacy issues, capable management, we expect RBL to report loan growth of ~36% over FY18-21E while earnings growth is likely to accelerate from FY20E (49%/~46% PAT growth estimate for FY20/21).
• We build in capital raise of INR25b during FY20E and thus revise our PT to INR700 (2.8x Sep20E ABV). Maintain Buy.

Piping hot news

Moody's puts India growth in 2018, 2019 at 7.5%

• The Indian economy is largely resilient to external pressures and is expected to grow around 7.5% in 2018 and 2019, Moody's Investors Service said. In its Global Macro Outlook for 2018-19, Moody’s said growth is supported by strong urban and rural demand and improved industrial activity, pointing to the strong PMI and the index of 8 core industries.