Buy IndusInd Bank; target of Rs 2250: Motilal Oswal
Motilal Oswal ‘s research report on IndusInd Bank
IndusInd Bank’s (IIB) 1QFY19 PAT grew 24% YoY to INR10.4b (marginally below our estimate). NII rose 20% YoY, while the NIM moderated 5bp QoQ, driven by an increase in funding cost (+22bp QoQ).Total income grew 16% YoY due to muted other income (+12% YoY) on account of low treasury gains (INR1.37b v/s INR1.93b in 1QFY18). Core fee income grew 20% YoY, led by 32% growth in distribution income. Controlled opex growth of 12% YoY (CI ratio declined 80bp QoQ to 44.2%) led to PPoP growth of 20% YoY (+8% QoQ).
The bank is targeting 25-30% loan growth, driven by continued branch expansion (aiming 2,000 branches by FY20 v/s 1,400 currently) and customer acquisition (+2x to 20m). Merger with BHAFIN will strengthen the bank’s earnings profile and further boost its return ratios. We maintain our estimates and revise our target price to INR2,250 (4x FY20E ABV).
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