Stock To Buy: This Large Cap Private Sector Bank Stock Likely To Gain 22%, Gave 24.49% In 3 Months

Brokerage firm KR Choksey in its recent report on IndusInd Bank Ltd Limited has recommended investors 'buy' the stock of the company for a target price of Rs 1,387 apiece. Considering this estimated target price by the brokerage, the stock is likely to gain 22% if the stock is purchased at the current market price.

IndusInd Bank Ltd is one of India's fastest-growing private banks. It commenced its operations in 1994 & currently caters to the consumer as well as corporate segments. The bank is well-positioned to seize opportunities and achieve strong credit growth, bolstered by a robust liability franchise. IndusInd Bank is a large-cap stock having a market cap of Rs 87,594.35 crore.

Stock Outlook

The current market price (CMP) of the stock is Rs 1,136.85 apiece. The Stock's 52-week low is Rs 763.20 apiece, which the stock recorded on 23 June 2022. The 52 week high of the stock is Rs 1,242 apiece, which was recorded on 28 October 2021.

Returns on Investment

The stock in the past 1 week gained 3.59%. In the past 1 month, the stock declined 5.77%. Whereas, in the past 3 months, it gave a positive return of 13.08%. The stock over the past 1 year gave a positive return of 11.3% and in the past 3 years, it gave a positive return of 82.83%, respectively. 

Retail segment to drive growth

The bank continues to strengthen its business by focusing on retail segments. On the liabilities side, the deposits have seen strong growth traction as the bank focused on a retail deposit mobilization strategy. IndusInd Bank continues executing a liabilities-driven growth strategy, primarily through retail deposits and customer acquisition. In addition, it has been investing in physical and digital distribution to maintain its liabilities momentum. A consistently higher liability franchise and a broader footprint will improve the loan book's growth. On the credit growth side, the bank expects the loan book to grow at a CAGR of 15-18% over FY20-23E, as per the PC-5 strategy. IndusInd Bank has been seeing strong growth in retail disbursement on a sustainable basis over the few quarters. As the bank unveils PC-6, the retail loans are expected to improve its share to 60% by FY26E from 54% in Q1FY23. 

Improving financial metrics

NIMs were stable at 4.2% in Q1FY23, supported by repricing of the assets and actively managing the liabilities. The bank expects margins to remain stable for FY23E aided by the rising yields & healthy loan book growth, despite higher share of fixed interest loan portfolio. On the fee income, the bank has built a granular fee mix with consumer banking contributing 70% to the total blend, exceeding its expectation of improving the share of consumer banking to 52%. IndusInd Bank is expected to focus more on transaction-based fee income. The Net profit for the bank has seen a growth of 2.2% CAGR over FY20-22, which was impacted due to higher provisions led by higher NPAs in FY20. The bank thrives towards maintaining healthy NIMs and operating profit margins in upcoming quarters. It has maintained an operating profit margin amongst the best in the banking industry. Going forward, we expect PAT to grow at a CAGR of 37.2% over FY22-24E on the back of healthy operating performance and lower credit costs. The profitability improvement boosts returns ratios, where we expect ROA/ROE to reach 1.7%/ 14.6% in FY24E from 1.1%/ 9.7% in FY22, respectively. 

Scaling up existing & new initiatives

IndusInd Bank has been scaling up the existing business and adding new growth boosters across assets and liabilities businesses. The assets side has planned the launch of home loans, scale-up of tractor financing, affordable housing, merchant acquiring and small corporates. The liabilities include scale-up of affluent, NRI, agency business and wealth management. 

Valuation, buy for target price of Rs 1,387 apiece

IndusInd Bank shares are currently trading at a P/Adj. BV multiple of 1.5x on adj. FY24E book value. 'We apply a P/Adj. Bv multiple of 1.9x to the FY24E adj. BVPS of INR 745.4 to maintain our target price of INR 1,387 per share, an upside of 25.5% over the CMP. Accordingly, we maintain our rating on the shares of IndusInd Bank to "BUY."', the brokerage has said. 

Disclaimer

The stock has been picked from the brokerage report of KR Choksey. 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.