Buy IndusInd Bank Ltd For Target Rs.1150 - ICICI Direct
Steady performance, business outlook improving…
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 30% of overall loans
* Strong pan-India presence with 5221 branches as on June 2021
Q1FY22 Results: IndusInd Bank reported operationally in line results.
* GNPA up 21 bps QoQ to 2.88%. Restructured book at 2.7%
* Total loan related provisions at 3.6% of loans
* Loan growth at 6.4% YoY while deposits were up 27% YoY
* NII up 7.7% YoY, NIMs down 7 bps QoQ to 4.06%, PAT at | 975 crore
What should investors do?
IndusInd Bank’s share price has given flattish returns in the past five years but in the past year the stock has gained ~2x. We believe the bank will show improved business growth with corporate book adding to the momentum along with a pick-up in vehicle financing.
Target Price and Valuation:
We value the bank at ~1.7x FY23E ABV with a revised target price of | 1150 per share (earlier | 1100).
* We retain our BUY rating on the stock
Key triggers for future price performance:
* Focus to pedal growth with corporate re-alignment over
* Healthy capitalisation (CRAR at 17.57%) post warrant conversion
* Maintain guidance on NIMs and business traction is positive
* Return ratios set to improve with RoA/RoE reaching 1.4%, 11.3%, respectively, by FY23E.
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 | 900
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