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Growth momentum continues to be 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 26% of overall loans

Strong pan-India presence with 5876 branches as on March 2022

Q4FY22 Results: IndusInd Bank reported a healthy performance.

GNPA down 21 bps QoQ to 2.27%. Restructured book down 70 bps to 2.6%

Total loan related provisions declined to 3.5% vs. 3.7% QoQ

Loan growth up 12.4% YoY and microfinance picked up with 18% YoY while deposits were up 15% YoY

NII up 12.7% YoY, NIMs improved QoQ to 4.2%, PAT at | 1361 crore

What should investors do? IndusInd Bank’s share price has gained ~1.8x in the past 18 months. 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 ~1.6x FY24E ABV and maintain a target price of | 1150 per share

Key triggers for future price performance:

Focus on domain segments & new launch to keep business growth healthy

Healthy provision cover & lower slippages to aid earnings momentum

Healthy NIM, control on opex, moderation in slippages with adequate capital adequacy to boost return ratios ahead

Alternate Stock Idea: Besides IndusInd, in our coverage we also like Axis Bank

Strong liability profile with healthy capitalisation makes the bank well placed to accrue earnings growth momentum. Healthy provision cover provides comfort on smoother earnings trajectory

BUY with target price of | 970

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