Brokerages have turned optimistic on IndusInd Bank after its first-quarter earnings of FY27, with both Nomura and Emkay Global Financial Services raising their target price for the stock. The increase in target prices came after the private lender made steady progress on controlling costs, improving asset quality and laying the foundation for a gradual recovery in profitability, even as margin expansion is expected to remain a medium-term story.
Nomura on IndusInd Bank
Nomura has raised the target price to Rs 1,145 from Rs 1,000, implying an upside of 7% from the current market price. While upgrading earnings to 9% for FY27 and 4% for FY28, the brokerage said, “Cost discipline now, margin recovery later.”
The change in multiple is driven by a higher RoE outlook.
“We raise our FY27 loan and deposit growth estimates to 15% and 13% (from 13% and 10%), lifting FY27 and FY28 earnings by 9% and 4%, respectively, on lower opex, even as the brokerage trims NIM by 13 bps and 18 bps,” said Nomura.
The bank targets industry-in-line growth for FY27, with a Q4 FY27 RoA of 1%, to be achieved primarily through lower opex and credit costs. The company’s management expects NIM contribution to be marginal in the near term.
Over the medium-to-long term, however, management sees NIM expansion as a bigger opportunity, led by a rising retail deposit share, higher LDR, and a loan mix shift toward higher-yielding retail and SME segments.
Emkay Global on IndusInd Bank
Emkay Global raised the price target to Rs 1,200 from Rs 1,100, implying an upside of 12% from the current market price. The brokerage maintained a ‘Buy’ rating on the stock.
The credit portfolio declined by 2% YoY but grew 3% QoQ due to heavy lifting by the wholesale segment. The company’s NIM expanded by 18 bps QoQ to 3.57%, aided by lower cost of funds and interest on IT refunds, while core NIM moderated to 3.35% in Q1FY27.
The management sees substantial room for margin improvement over the medium term, backed by a 150 bps funding cost gap vs peers and increasing share of granular retail, affluent and NRI deposits.
Asset quality also showed signs of improvement, with slippage ratio moderating to 2% in Q1 from over 3% in Q3 FY25, leading to lower credit cost.
Though IndusInd Bank’s long-term strategy is still evolving, the management said it targets achieving growth broadly in line with system credit growth in FY27. This playing out, coupled with moderation in credit cost and a conscious effort to bring down opex, is likely to help IndusInd Bank gradually secure 1% exit ROA in FY27 from the 0.45% base in Q4 FY26.
IndusInd Bank share price performance
The share price of IndusInd Bank has fallen 2.5% in the last five trading days. The stock has surged 7.8% in the past one month and 12% in the last six months. IndusInd Bank’s share price has surged 18% over the past one year.
Disclaimer: This article provides factual analysis only and is not, and should not be construed as, an offer, solicitation, or recommendation to buy or sell securities. Investors must conduct their own independent due diligence and seek advice from a SEBI-registered financial advisor.