Buy IndusInd Bank With A Target Price of Rs. 1,300: Motilal Oswal

IndusInd Bank's stock has been given a buy call recommendation by brokerage company Motilal Oswal. IndusInd Bank has a 40% upside from its current market price of Rs 927.45 as of 31 Jan, 9:07 IST, following its 3QFY22 results. As a result, the brokerage has set a Rs 1300 target price.

3QFY22 result update of IndusInd Bank (IIB) according to the brokerage

Motilal Oswal has said in a report that "IIB reported a PAT of INR12.41b (7% beat; 49% YoY growth) in 3QFY22, led by an 11% YoY decline in provisions, while revenue growth stood in line. NII grew ~11% YoY to INR37.94b (in-line), while other income grew 14% on healthy treasury gains. NIM improved by 3bp QoQ to 4.1%, aided by declining cost of funds, even as corporate yields fell 42bp QoQ. Operating expenses grew 13% YoY to INR23.58b (in-line). C/I ratio stood at 41.6% v/s 41.3% in 3QFY21. PPOP grew 12% YoY to ~INR33.1b. NII/PPOP/PAT grew 10%/11%/70% YoY to INR110b/INR97b/INR34b in 9MFY22."

According to the brokerage "On the business front, advances grew 3.5% QoQ and 10% YoY, largely led by the Corporate book, which grew 6.5% QoQ. In the Consumer business, disbursement growth picked up in the Vehicle segment, with disbursements higher than pre-COVID levels. The Tractor business maintained its healthy momentum at 24% YoY, while Credit Card spends grew 28% QoQ. Retail to Wholesale mix stood at 54:46. Deposit growth stood at 19% YoY, with CASA mix stable at 42.2%, and Retail deposit mix at 40% as per LCR."

The brokerage has further highlighted that "On the asset quality front, fresh slippages stood elevated at INR25.98b (MFI slippages of INR13.4b). GNPA/NNPA ratio moderated by 29bp/9bp QoQ to 2.48%/0.71%. PCR ratio stood stable ~72%. Outstanding restructured loans declined to 3.3% v/s 3.6% in 2QFY22, while the net SR book stood at 85bp of loans. The bank holds contingent provisions of INR33.28b (1.5% of loans)."

Buy With A Target Price of Rs 1300

Motilal Oswal has claimed in a report that "IIB reported an in-line operating performance, with growth trends stabilizing and asset quality ratios improving, despite elevated slippages from the MFI portfolio, but was partly aided by higher sales to ARCs. The management is guiding at improved growth trends from FY23 onwards. Healthy provisioning in the MFI portfolio and contingent provisioning buffer of 1.5% of loans will enable a sharp decline in credit cost, driving a recovery in earnings. We expect IIB to deliver 37% earnings CAGR over FY22-24E, leading to 16% RoE in FY24E. We maintain our Buy rating with a TP of INR1,300/share (1.8x Sep'23E ABV)."

Disclaimer

The stock has been picked from the brokerage report of Motilal Oswal. 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.