Buy This Large Banking Stock For Aggressive 47% Returns, Paying 85% Dividend Soon: Suggests Top Brokerage Firm

Brokerage firm Prabhudas Lilladher suggests investors buying the stocks of IndusInd Bank, for a high near-term return. According to the recently published quarterly results, its NII was slightly ahead at Rs. 41.2bn, +16% YoY led by better NIM at 4.62%. The bank is going to pay a final dividend of Rs. 8.5 per share, and the ex-dividend date will be August 11, 2022.

Stock To Buy: Target Price, Current Market Price

The Current Market Price (CMP) of IndusInd Bank is Rs. 879. Prabhudas Lilladher has estimated a Target Price for the stock at Rs. 1300. This stock has the potential to give a 47.89% return, in the upcoming 1 year. This is a large-cap stock with a market capitalization of around Rs. 73,487 crore.

Stock Outlook
Current Market Price (CMP)	Rs. 879
Target Price	Rs. 1300
Potential 1 year return	47.89%
52 week high share price	Rs. 1,242
52 week low share price	Rs. 763.20

Credit growth at 17.7% YoY was a bit lower; deposits grew by 13.3%. CASA saw a 40bps QoQ uptick to 43.1%. Other income was higher at Rs19.3bn mainly due to a beat on fee income at Rs17.9bn while treasury reported a gain. Opex was a tad higher at Rs26.6bn. While slippages were only a tad higher, GNPA/NNPA saw an 8/3bps blip to 2.35%/0.67% owing to lower recoveries. PAT was higher at Rs. 16.3bn while core PAT at Rs. 15.2bn.

Stock advantages: Prabhudas Lilladher

Maintaining a buy rating, Prabhudas Lilladher mentioned the stock's advantages, "IndusInd Bank saw a good quarter with core earnings at Rs. 15.2bn beating estimates by 2.5% led by stronger fee income and lower provisions. NII/NIM were better owing to a positive impact of yield while fees saw healthy traction as share of retail fees enhanced. GNPA saw a minor blip due to lower recoveries. Credit momentum is expected to continue and IIB is targeting a 15-18% loan growth keeping credit costs contained between 1.2-1.5%. Focus is to garner retail deposits which would require branch addition that could keep opex elevated. We see a loan CAGR of ~16% over FY22-24E with declining provision costs, while deposit accretion remains the key monitorable. Over FY22-24E we expect a healthy 33% CAGR in earnings and RoE may enhance from 10% to 15%. Valuation at 1.2x FY24ABV is undemanding."

Company profile:

The bank's provisions were Rs. 12.5bn in the last quarter. Pre-provision operating profit (PPOP) surprised positively by 7.7% at Rs. 34.3bn while core PPoP came in as expected at Rs. 33bn. According to the company profile, "IndusInd Bank is a universal Bank with a widespread banking footprint with over 2.5 crore customers, over 5,000 distribution points, and nearly 2,000 branches across the country." They offer a wide array of products and services for individuals and corporates including microfinance, personal loans, personal and commercial vehicle loans, credit cards, and SME loans.

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.