Broking firm Sharekhan has a buy call on the stock of IndusInd Bank for a price target of Rs 1340 from the current market price of Rs 1,300.
Retail to be the driving force for IndusInd Bank, says Sharekhan
Sharekhan expects IndusInd Bank to address challenges through a combination of better strategy and execution and prudent disclosure with focus on reducing risk, etc.
"While for the near term, asset quality will be a monitorable, we expect pessimism to gradually ease over the medium term. Factors such as the bank's willingness to recognise stress upfront in any loan segment before it becomes challenging to manage and its strategy to build adequate provisions or counter cyclical buffers if the business is risky will be cushions for the long term," says the brokerage.
Net interest margins to be at 4 to 4.1%, says the brokerage
"Our constructive view on IndusInd Back is backed by its demonstrated strong asset-quality performance (for most period in recent years, except in the near past), along with improved capital levels (Tier-1 at 16.9%). Near term challenges continue, but we expect advances growth and credit cost to normalise in FY2023E, given improving macro conditions and the bank's stated stance to front-load provisions. We expect net interest margins to be at 4.0-4.1% for the medium term, supported by its improving liability franchise," the brokerage has said,
Reasonable on valuations
According to Sharekhan, IndusInd Bank IB currently trades at 1.6x/1.4x/1.3x its FY2022E/FY2023E/FY2024 book value, which is reasonable. The bank's well-capitalised balance sheet and provision buffer are cushions for profitability.
"We believe the growth outlook is improving. Moreover, improving corporate exposure and low expected restructuring pipeline indicate that credit cost is manageable, and business normalcy is expected to resume in FY2022E. We opine the bank is in an improved position vis-à-vis its balance sheet and valuations are reasonable. While near-term asset quality will be a key monitorable, we believe the outlook is improving for the bank. We maintain Buy on the stock with an unchanged PT of Rs. 1,340," the brokerage has said.
Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage houses are not liable for any losses caused as a result of decisions based on the article. The above article is for informational purposes only and has been taken from the report of Sharekhan. Be careful while investing as the Sensex has now crossed 58,000 points.