Arihant Capital recommended hold rating on IndusInd Bank with a target price of Rs 557 in its research report dated July 30, 2020.
Arihant Capital 's research report on IndusInd Bank
IndusInd Bank reported steady operating performance during Q1FY21. NII for the quarter grew by 16% YoY/2% QoQ to Rs 3,309 cr, despite a lower loan growth of 2% YoY/-4% QoQ. NII growth was mainly driven by NIM improvement of 3bps QoQ/23bps YoY at 4.28%. Operating profit of the bank increased by 10% YoY/1% QoQ to Rs 2,861 cr. Lower operating profit growth was mainly due to 9% YoY/14% QoQ fall in other income. Provision remained higher at Rs 2,259 cr, which includes additional Covid provision of Rs 920 cr (Total Covid provision at 1,203 cr). Profit for the quarter fell by 68% YoY to Rs 461 cr, primarily, due to higher provisioning. On a sequential basis, PAT grew by 53%. On the business front, the bank has witnessed de-growth in advances at 4.2% on QoQ basis while on YoY basis it grew by 2.4%. Bank has gained strong traction in deposit growth at 5% QoQ vs. 7% QoQ fall in Q4FY20. Liquidity coverage ratio of the bank improved to 124% vs. 112% QoQ.
Outlook
IndusInd Bank is currently trading at a P/adj. BV of 1.0x to its FY22E ABV. We assign a P/adj. BV of 1x for FY22E ABVPS of Rs 557 per share for a target price of Rs 557 per share while maintaining our Neutral rating.
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