IndusInd Bank share price jumped 4% to hit an intraday high of Rs 1,025 on Monday morning after the lender reported a growth of 51.2% on-year in its consolidated profit after tax (PAT) of Rs 1,400.5 crore as compared to Rs 926.07 crore registered a year back. The Net Interest Income (NII) for the private sector lender rose 12.7% on-year to Rs 3,985 crore. Brokerages remain bullish on the stock and see up to 35% upside, given the bank’s well-capitalized balance sheet, improvement in collection efficiencies in MFI business, reduction in fresh slippages/restructured book and high PCR levels. International brokerage and research firm Morgan Stanley has kept its overweight rating on the stock and raised the target price to Rs 1,300 per share.
Should you buy, hold or sell IndusInd Bank shares?
Sharekhan: Buy
Target price: Rs 1,150; Upside: 17%
According to analysts at Sharekhan, “a well-capitalized balance sheet, improvement in collection efficiencies in MFI business, reduction in fresh slippages/ restructured book and high PCR levels, credit cost seems to be manageable and business normalcy is expected to resume in FY2023E. Given the improvement in demand in its vehicle portfolio, MFI business and corporate book, the bank is on upward trajectory path in terms of ROA & ROE profile going forward. Bank guided for credit growth of 15-18% going forward along with building granular retail liability franchise.” The brokerage firm believes that valuations are reasonable. Hence, it maintains a Buy rating on the stock with an unchanged target price of Rs 1,150.
CLSA: Buy
Target price: Rs 1,200; Upside: 22%
IndusInd Bank’s pre-provisioning operating profit for the quarter ended March was marginally ahead of CLSA’s expectations. According to analysts at CLSA, asset quality trends are normalising. After three years of consolidation, the research firm expects growth to pick up to 15% over FY22-25CL. “Collections in MFI and CVs have fully normalised and this should drive a normalisation of credit costs to 160bps over FY23-24CL. The quality of its liabilities has improved but the real test of its liability franchise will be with the rising rate cycle ahead and increasing loan growth,” it said in its note. The results of the external audit of its MFI book was a relief and 4QFY22 trends indicate asset quality is clearly turning and could trigger a partial reversal of the de-rating due to the MFI issue, it added. CLSA maintains a ‘Buy’ rating on the stock with a target price of Rs 1,200 per share.
JM Financial: Buy
Target price: Rs 1,325; Upside: 35%
IndusInd Bank reported a steady set of 4QFY22 results with improving growth momentum; in-line operating performance; and continued improvement in asset quality. While slippages were a tad high driven by higher slippages in MFI segment, management indicated that this should be the last leg of slippages and asset quality should see a marked improvement going ahead. “Over the last few years, management has taken steps in the right direction (risk calibrated growth approach, retailization of deposit profile, balanced fee mix) which should start bearing fruits incrementally, resulting in improvement in return profile of the bank. We expect credit costs to moderate from FY23E onwards and see RoA/RoE to gradually improve to 1.9%/16.5% by FY24E,” the brokerage said. It expects IIB to gradually improve its profitability as credit costs normalize, which along with an uptick in loan growth should drive the future stock price performance. JMFL maintains a ‘Buy’ call on the stock with a target price of Rs 1,325 apiece.
Motilal Oswal: Buy
Target price: Rs 1,300; Upside: 33%
According to analysts at Motilal Oswal Financial Services, IIB’s operating performance remains on track, led by healthy NII growth, lower slippages, and controlled provisions. Asset quality ratios improved sequentially as stress in the MFI/Vehicle portfolio subsided. The management guided at continued momentum in loan growth, led by steady trends across both Consumer and Corporate businesses. “Healthy provisioning in the MFI portfolio and contingent provisioning buffer of 1.4% of loans will enable a sharp drop in credit cost, driving a sharp recovery in earnings. We expect 37% PAT CAGR over FY22-24, resulting in 15.5% RoE in FY24,” the brokerage said. It maintains a ‘buy’ rating on IndusInd Bank stock with a target price of Rs 1,300 per share.
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