MENU

Published on 12/07/2018 2:28:43 PM | Source: Motilal Oswal Securities Ltd

Buy IndusInd Bank Ltd For Target Rs.2,250.00 - Motilal Oswal

Controlled opex supports operating performance; asset quality stable

*  IndusInd Bank's (IIB) 1QFY19 PAT grew 24% YoY to INR10.4b (marginally below our estimate). NII rose 20% YoY, while the NIM moderated 5bp QoQ, driven by an increase in funding cost (+22bp QoQ).

*  Total income grew 16% YoY due to muted other income (+12% YoY) on account of low treasury gains (INR1.37b v/s INR1.93b in 1QFY18). Core fee income grew 20% YoY, led by 32% growth in distribution income. Controlled opex growth of 12% YoY (CI ratio declined 80bp QoQ to 44.2%) led to PPoP growth of 20% YoY (+8% QoQ).

*  Loan growth was led by robust growth in large corporates and small businesses, driving 30% YoY growth in the corporate portfolio. Consumer portfolio grew 28% YoY (+5% QoQ), led by strong traction in the CV loans, equipment financing and credit card segments. The share of retail loans to total book stands at 40% (46% if considered BBG as part of CFD).

*  GNPA/NNPA increased 2.1%/2.2% QoQ. IIB sold INR1.49b of loans to ARCs. GNPA/NNPA ratios were in control at 1.15%/0.51% (-2bp/0bp QoQ).

Other highlights:

(1) Robust CASA accretion continued with 51% YoY S/A growth. (2) Tier-1 ratio declined 29bp QoQ to 14.3% (CET1: 13.2%).

Valuation and view:

IIB’s key focus is to scale up on its retail operations, led by a higher share of non-vehicle retail loans by FY20. The bank is targeting 25-30% loan growth, driven by continued branch expansion (aiming 2,000 branches by FY20 v/s 1,400 currently) and customer acquisition (+2x to 20m). Merger with BHAFIN will strengthen the bank's earnings profile and further boost its return ratios. We maintain our estimates and revise our target price to INR2,250 (4x FY20E ABV).

To Read Complete Report & Disclaimer Click Here

For More Motilal Oswal Securities Ltd Disclaimer http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html SEBI Registration number is INH000000412 

Above views are of the author and not of the website kindly read disclaimer