IndusInd Bank share price has risen around 27 per cent in the last one month, outperforming benchmark Nifty 50 which has rallied 8 per cent. IndusInd Bank shares were quoting Rs 1,045 apiece, up 2.7% on NSE intraday. The stock has jumped in the last two days after the private sector bank reported a 61 per cent jump in net profit at Rs 1,631.02 crore for the April-June quarter, mainly due to a fall in bad loans. So far this year, IndusInd Bank shares have jumped 13 per cent and brokerage firms see further upside of up to 39% after the management commentary reinstated their confidence in the lender’s ability to deliver on retail liability and asset growth.
Should you buy IndusInd Bank shares?
Confidence on business model, management team
Edelweiss Securities stated in a report that with the appointment of new leaders for Vehicle Finance (VF) and Micro Finance (MF), IndusInd Bank’s two flagship businesses, concerns of being as good as their predecessors did surface. However, the leaders’ first public address made the brokerage confident that the successors are capable of scaling these businesses. “In addition to a cyclical recovery in earnings expected over the next two years, the bank is focussing on structural changes to its business model by making it more granular and digital.
The brokerage further highlighted that IndusInd Bank will announce a new domain in addition to the existing three over the next year. “The new domain will mostly be acquired inorganically. It will also launch traditional investment banking and para-banking. At 1.3x PBV FY24E we find the risk-reward compelling,” it said. The brokerage maintains ‘buy’ rating on the stock with an increased target ptie of Rs 1,350 as it has more comfort on the model and the team post the analyst day.
Asset growth achievable; expanding in home markets to be a key growth driver
Brokerage firm Prabhudas Lilladher believes that expanding in home markets would be a key driver to IndusInd Bank’s business growth. “The bank is targeting a CASA ratio of >45% while retail to wholesale loan mix could change from 52:48 to 60:40. Better earnings quality is also a focus area. While asset growth may be achievable, material RTD growth might not be easy given tightened systemic liquidity,” it said. However, asset quality risks have abated and RoE improvement from 10% to 15% over FY22-24E warrants a higher valuation, according to the analysts. Prabhudas Lilladher maintains multiple at 1.8x on FY24 ABV and retains ‘buy’ rating with a target price of Rs 1,300.
Execution and management continuity to be key
ICICI Securities expects IndusInd Bank to deliver more than 5% PPoP/loans, 1.7%, 1.9% RoAs and 15%, 16% RoEs by FY23E and FY24E respectively. It maintains a ‘buy’ call on the stock with an unchanged target price of Rs 1,420 (1.8x FY24E book), implying a 39% upside from Thursday’s closing price. “We believe execution and management continuity will be key,” they said.
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