Buy IndusInd Bank Ltd For Target Rs.1400 - ICICI Direct
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Steady operating performance, credit pick-up healthy
About the stock: IndusInd Bank is a Hinduja group promoted newer age private sector bank and is the fifth largest private bank in India.
* Vehicle finance forms around 27% of overall loans
* Strong pan-India presence with 5507 branches as on September 2021
Q2FY22 Results: IndusInd Bank reported operationally steady results.
* GNPA down 11 bps QoQ to 2.77%. Restructured book at 3.6%
* Total loan related provisions at 3.9% of loans
* Loan growth was 9.7% YoY while deposits were up 20.7% YoY
* NII up 11.6% YoY, NIMs flat QoQ to 4.07%, PAT at | 1113 crore
What should investors do? IndusInd Bank’s share price has gained ~2x in the past one year. We believe the bank will show improved business traction with corporate book adding to the momentum.
* We retain our BUY rating on the stock
Target Price and Valuation: We value the bank at ~2.4x FY23E ABV with a revised target price of | 1400 per share (earlier | 1150).
Key triggers for future price performance:
* Healthy growth guidance of 16-18% is a positive
* Comfortable capitalisation (CRAR at 17.37%)
* Sufficient provisions, 3.9% of loans, to curb earnings volatility
* Return ratios set to improve with RoA, RoE reaching 1.3%, 12.3%, respectively, by FY23E
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