Buy This Banking Stock For A Target Price Of Rs 1,200 Says Anand Rathi

IndusInd Bank is India's 5th largest private sector bank with Rs 78,817 Crore market cap. The bank has a large financial reach with over 5,000 distribution sites and approximately 2,000 branches across the nation. Microfinance, personal loans, personal and commercial vehicle loans, credit cards, and SME loans are among the goods and services available to both retail and business consumers. On 04th May 2022, the stock of the bank witnessed a fall and closed at Rs 978.30 per share. Today, on 05th May, it opened with surge at Rs 989.55. The current market price of this stock is Rs 10.42 IST is Rs Rs 980.70. The brokerage firm, Anand Rathi Financial Services has put a buy rating for a target price of Rs 1,200.

Why Should You Buy?

As per the brokerage, "Gross Non-Performing Asset (GNPA) decreased 21bps sequentially to 2.27% largely because of high write-offs (Rs13.5bn). Slippages were Rs20.9bn (3.5% of loans), of which Rs17.4bn stemmed from the retail book. The restructured book was ~Rs62bn (down 17.6% q/q). With most of the stress already delinquent/restructured and collections reaching pre-Covid levels, slippages are expected to ease from Q1 FY23."

Q4FY22 Result

The brokerage firm has said, "IndusInd Bank's Q4 FY22 profitability improved, with a 1.51% RoA (up16bps q/q) and better asset quality. Key positives are 1) strong dis-bursements in the corporate and VF books, 2) strong retail deposit growth, 3) sturdy balance sheet with 72% coverage and a Rs 33bn provision buffer (1.4% of loans) and 4) strong liquidity and capitalisation. With credit growth picking up and normalising credit costs, earnings would improve."

Valuation

The brokerage firm has said, "We maintain our positive view on the bank with a Target Price of Rs 1,200, valuing it at 1.6x P/ABV on its FY24e book." It added, "Our May'23 Rs1,200 target is based on the two-stage DDM model. This implies a ~1.6x P/ABV multiple on its FY24e book."

According to Anand Rathi key risks for the stock are, "Lumpy slippage from the corporate book; volatility in asset quality from the MFI book."

Disclaimer

The stock has been picked from the brokerage report of Anand Rathi. Investing in equities poses a risk of financial losses. 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. Goodreturns.in advises users to check with certified experts before taking any investment decisions.