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MOSL: Morning India (5/March/20): 1. Bandhan Bank - Initiating Coverage (Braving the challenges! Buy with TP INR500, 25% Upside); 2. V-Mart (Upgrade to Buy)

MOrning India (5/March/20):

Today’s top research idea
Bandhan Bank (Initiating Coverage): Braving the challenges! Return ratios strong; asset diversification to drive sustainable growth
** Bandhan Bank (BANDHAN) has strengthened its positioning as one of the key financial institutions in east/north-east India. It has maintained a healthy market share of ~19% in MFI loans with a CAGR of 35% since FY15.

** The merger with Gruh Finance will help improve asset diversification and provide opportunities to cross-sell varied asset products. Moreover, a leaner cost structure will ensure sustained cost leadership of the merged entity.

** BANDHAN has built a strong deposit franchise (53% CAGR over FY16-19) with a focus on granularity, with retail deposits forming ~76% of total deposits and CASA at 34.3%.

** With its share of volatility, the stock offers a great long-term opportunity as it has corrected significantly owing to concerns about promoter shareholding and recent state-level issues.

** We nevertheless expect the bank to deliver industry leading RoA/RoE of 3.7%/23.4% for FY22. Valuations appear reasonable and reflect near-term risks emanating from Assam. Initiate with a Buy rating and a TP of INR500 (3.8x Sep'21E BV).

Piping hot news
Domestic air passenger traffic rose by 2.5 per cent in January: IATA
Revenue passenger kilometres growth in the India domestic market was broadly unchanged in January compared to December, at 2.5 per cent year-on-year, said a statement issued by the International Air Transport Association (IATA). In December last year, RPK growth in Indian domestic air passenger market was 2.8 per cent, the IATA stated.