Buy This Large Cap Banking Stock For Rs 1300 Target Price To Get 17% Returns: Anand Rathi

Stock Outlook

The current market price of the stock is Rs 1,108.80 apiece. The stock's 52 week low level is Rs 763.20 apiece recorded on 23 June 2022 and the 52 week high level is Rs 1,242 apiece recorded on 28 October 2021, respectively. On intra-day, the stock's low is Rs 1,097.60 and the high is Rs 1,118.75, respectively.

Returns on Investment

The stock over the past 1 week surged 0.12%. Whereas, over the past 1 and 3 months, the stock has given positive returns of 7% and 19.39%, respectively. In the past 1 year, it gave a positive return of 11.78%. However, in the past 3 and 5 years, the stock gave negative returns of 16.7% and 34.19%, respectively.

 

Credit growth to be strong

On IIB's good disbursement in vehicle and MFI books in Q1, we expect the traction to continue as both industries are experiencing revived demand. Corporate credit is expected to pick up on the government's infra push till the 2024 general elections. We expect overall credit growth to continue strong in the medium term.

Strong margins, lower credit cost to drive RoA

In the rising interest-rate context, NIM is expected to hold above 4%. Higher margins and the expected moderation in operating expenses would keep operating profits strong. On the good operating performance, a pick-up in business growth and the benign credit-cost cycle, profitability is expected to be robust. We estimate a ~1.7% RoA each for FY23 and FY24.

Credit growth to pick up, earnings outlook bright

According to the brokerage firm, "Immediately after the first Covid wave, Indusind Bank was severely hit on both asset and liability sides. Its turnaround in the last few quarters has been stellar given that one-third of its assets (VF+MFI books) were impacted and the strong run on deposits on its liability side. Stress on its VF & MFI books was much lower than the industry and strong traction was seen in deposits. We expect credit growth and profitability to be strong on account revived demand in MFI and vehicle finance; bright corporate outlook in on the government's infra push; sturdy balance sheet (72% coverage, Rs30bn provision buffer, 1.2% of loans) and strong liquidity and capitalisation."

Valuation & Risks

"Our Sep'23 Rs1,300 target stems from a two-stage DDM model. This implies a ~1.7x P/ABV multiple on its FY24e book," the brokerage has said.

According to the brokerage firm, the risk would be lumpy slippage in the corporate book; volatility in asset quality from the MFI book.

Disclaimer

The stock has been picked from the brokerage report of Anand Rathi. Greynium Information Technologies, the Author, and the respective 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 making any investment decision.