Buy IndusInd Bank; target of Rs 1832 Prabhudas Lilladher

Prabhudas Lilladher's research report on IndusInd Bank

IIB's earnings were below estimates at Rs3.6bn mainly on bank providing incrementally Rs11.2bn on recognizing IL&FS which had been indicated earlier. Ex-IL&FS, core performance has been decent but was weak on NII due to impact from cost of funds and was led by other income. Bank explained provisions on IL&FS are enough and have cushion from operating sub on recovery. Also, it has only 1.9% FB+NFB exposure to recent stressed groups, also SMA-1 & SMA-2 together remains benign at 0.6% of loans. Bank should quickly come back on track as operationally it remains strong with better NIM+fees, control in opex and moderation in credit cost, helping deliver ROEs of 17-18% in next 2 years.

Outlook

We maintain BUY with revised TP of Rs1,832 (from Rs1,791) based on 3.2x multiple as we roll forward to Mar-21 ABV.

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