Buy Stock Of IndusInd Bank For 19% Upside, Deposits Grew 15%, GNPA Falls Sharply: Prabhudas Lilladher

Top brokerage firm Prabhudas Lilladher gives a buy rating to the stock of IndusInd Bank. The bank saw a strong quarter with core earnings beating estimates by 9% led by lower provisions due to material improvement in asset quality. Its corporate banking segment grew by 22.9%YoY/6.4% QoQ led by Large and small corporate groups. Large corporate growth was driven by strategic customer groups and financial services.

Stock To Buy: Target Price

The Current Market Price (CMP) of IndusInd Bank (IIB) is around Rs. 1150. Prabhudas Lilladher has estimated a Target Price for the stock at Rs. 1450. This stock has the potential to give a 19.04% return, in the upcoming 1 year. It is a large-cap stock with a market capitalization of around Rs. 88,180 crore.

Stock Outlook
Current Market Price (CMP)	Rs. 1,218
Target Price	Rs. 1,450
Potential Upside	19.04%
52-week high share price	Rs. 1,275.80
52-week low share price	Rs. 763.20

Strong quarterly earnings

GNPA fell by 24bps QoQ to 2.1% driven by considerable reduction (~50%) in net slippages while OTR pool too decreased from 2.1% to 1.5% QoQ and 70% of the fall was led by recoveries. IIB is targeting a loan growth of 18-20% in FY23, keeping credit costs between 1.2-1.5%, though opex may remain elevated. Deposits growth has been strong at 14.7% YoY majorly driven by retail deposit growth which is the key focus of Bank. CASA (Current Account and Savings Account) declined to 42% due to lower SA, however over medium to long term CASA ratio would remain between 41-43%.

Stock Valuation

Retaining the buy rating, Prabhudas Lilladher said, "Strong retail deposit formation would require rate gap with peers to be maintained. With material stress reduction, we lower provisions for FY23/24 and raise PAT by average ~5.3%. Over FY22-25E we expect an earnings CAGR of 31% while RoE may rise from 10% to 16%. Rolling forward to Sep'24 ABV we maintain multiple at 1.8x but raise target price from Rs. 1,300 to Rs. 1,450."

Credit momentum

Loan growth at 4.9% QoQ was mainly led by C&I while CV, SB, CC, UV and cars also saw good traction. Large corporate growth was driven by financial services, steel, cement, real estate and power generation; 70% of disbursals were for WC. Mid corporate accretion was led by SME and healthcare. Capex revival in public sector would lead to growth momentum. VF is seeing traction barring 2W.

Cost/income (C/I) to remain stretched

Cost/income (C/I) remained elevated at 44.2% due to higher employee expenses owing to appraisals. Cost is expected to increase as focus would be on mortgages, digital & tech-related cost, and branch expansion. Hence in the short term C/I could remain near 44%. However, over medium term C/I is expected to range from 41-43%.

Disclaimer

The above stock was picked from the brokerage report of Prabhudas Lilladher. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.