Daily Brief India: Bandhan Bank Ltd, Axis Bank Ltd, JSW Steel Ltd, Lippo Malls Indonesia Retail Trust and more

• In its recent result, Bandhan Bank Ltd (BANDHAN IN) did not report the kind of improvement in asset quality in its core Microfinance segment that we were hoping to see.
• Fresh slippages into overdue accounts did not slow down as anticipated; NPA levels remained elevated; Loan growth is below the target run-rate.
• We anticipate the recovery to be drawn out, and hence suggest keeping patience. But  we maintain our long-term valuation of Bandhan Bank unchanged at 2.1x FY25e P/BV, implying +56% upside.

• Loan mix is improving, away from non-INR loans, asset mix is improving with less RIDF bonds, and bank is seeing an expanding LDR. 
• Loss loans and doubtful loans are in major decline, they are less important to total NPLs, and still credit costs were high in 1Q24, likely overly conservative.
• Credit growth is now at 22.6% YoY from 14.9% YoY one year ago, with consistent acceleration. With just 6% loan share, growth can remain high.

JSW Steel has delivered strong Q2/23-24 results in our view, driven by higher volumes and a recovery in steel prices. The numbers were in line with management’s earlier guidance for an improvement in operating environment and steel prices. The financial risk profile is improving, and liquidity is adequate.

Steel prices remained the key credit driver. A small price increase has resulted in a significant EBITDA increment, due to the high operating leverage. Based on management’s guidance for an improvement in the operating environment and steel prices, we expect better H2/23-24 numbers, with revenues inching up and a larger earnings improvement. Debt will likely remain stable following the merger with JISPL (completed in Q2), and the leverage profile should continue improving on the back of higher earnings.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

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