IndusInd Bank shares fell over 3 per cent on Monday, a day after the company reported a 50% on-year jump in third-quarter net profit, aided by loan expansions and a rise in fee incomes. The stock touched intraday low of Rs 867, just 6 per cent away from its 52-week low level. “The Q3FY22 PAT of IndusInd Bank (IIB) at Rs 12.4bn was exactly in line with estimates. Asset quality witnessed mixed trends; slippages remaining high at 4.7% with 90%-plus stemming from retail (essentially MFI, a key monitorable). IIB continues to strengthen its provision buffer — a useful cushion in dealing with current uncertainty. Business traction is on expected lines,” said Edelweiss in its note. In the past one year, IndusInd Bank stock has tanked over 10 per cent as opposed to benchmark Sensex rising 19.35 per cent.
Nomura: BUY
Target price: Rs 1,325
Nomura maintained a Buy rating on the stock but lowered target price to Rs 1,325. “We adjust FY22F/23/24F EPS by -13%/+0.5%/+1.1%, mainly to account for the lower earnings in 3Q, while retaining most ratios for FY23-24F. We are building a 14.4% book-value CAGR over FY21-24F. The stock trades at 1.6x P/B (Dec-21) and 8.7x P/E (12m to Dec-22F) vs 10-year averages of 3.5x and 20x, respectively. We roll forward our valuation by a quarter. Our new TP implies 2.0x P/B (Dec-22F) and 10.8x P/E (12m to Dec-23F). Risks: Higher credit costs, weaker loan growth and lower NIM,” the foreign brokerage house stated.
Jefferies: BUY
Target price: Rs 1,220
Jefferies lowered earnings for FY22-24E slightly in order to factor in slightly higher credit costs, even as utilisation of buffer provisions could offset this impact. “Valuation at 1.3x FY23E adjusted PB is at a significant discount to peers and improvement in growth as well as normalisation of credit costs should be key to re-rating. We revise our price target to Rs 1,220 (from Rs 1,400) based on 1.6x Dec-23E adjusted PB with BUY rating,” the international brokerage said.
Haitong: OUTPERFORM
Target price: Rs 1,239
Haitong lowered its loan growth projection for FY22E, while it maintained estimates broadly for FY23/24E. “With continued investments towards tech, distribution, and people we have marginally increased our opex estimates. We believe the risk on telecom exposure has significantly reduced and the worst for MFI is clearly behind, thus receding the asset quality stress here-on. However, with higher slippages in 3Q, we have increased our slippages to 3.2% vs 2.8% earlier over FY22-24E,” it said. The brokerage maintained OUTPERFORM rating on the stock with a revised target price of Rs 1,239 from Rs 1,283 earlier. The stock’s total return over the next 12-18 months is expected to exceed the return of a broad market benchmark.
LKP Securities: BUY
Target price: Rs 1,061
According to the domestic brokerage house, core operating performance of Indusind Bank remains healthy, and a higher PCR is likely to safeguard the bank from credit disruption. It believes that the lender has made adequate provisioning against potential stress and expects the credit cost to normalize during the exit of FY22. LKP Securities maintained BUY rating on the stock with target price of Rs 1,061 (based on 1.6x FY23E Adj. BVPS of Rs 663).
JM Financial: BUY
Target price: Rs 1,325
JM Financial expects credit costs to moderate from FY23E onwards and sees RoA/RoE to gradually improve to 1.9%/16.6% by FY24E. “IIB stock trades at 1.1x FY24E BVPS and going ahead, we expect the stock price to be driven by increased visibility on credit cost normalisation accompanied by steady inch up in loan growth,” it said. The brokerage maintained BUY rating on the stock with a target price of Rs 1,325 valuing the bank at 1.6x FY24E P/BV. BUY INR 1,325 per share.
Motilal Oswal: BUY
Target price: Rs 1,300
IndusInd Bank reported an in line operating performance, with growth trends stabilizing and asset quality ratios improving, despite elevated slippages from the MFI portfolio, but was partly aided by higher sales to ARCs, said Motilal Oswal adding that management is guiding at improved growth trends from FY23 onwards. “Healthy provisioning in the MFI portfolio and contingent provisioning buffer of 1.5% of loans will enable a sharp decline in credit cost, driving a recovery in earnings. We expect IIB to deliver 37% earnings CAGR over FY22-24E, leading to 16% RoE in FY24E.” The brokerage firm maintained a Buy rating with a target price of Rs 1,300 per share.
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