Buy IndusInd Bank; target of Rs 1900: Motilal Oswal
Motilal Oswal’s research report on IndusInd Bank
IIB reported PAT of INR3.6b (our estimate: INR5.3b) in 4QFY19, affected by higher provisions of INR15.6b (INR11.2b toward IL&FS). NII growth moderated to 11% YoY led by interest reversal of INR1.5b, while the NIM shrank to 3.59% (3.84% without interest reversals). For FY19, NII/PPoP grew 18%/22%, while PAT declined 8.5% YoY to INR33b. Total income increased 18% YoY, led by healthy other income growth of 29% YoY. Core fees rose 28% YoY, led by forex income and loan processing fees. Opex growth (+19% YoY) was slightly higher, leading to PPoP growth of 17% YoY. IIB guided for a C/I ratio improvement of 150bp to 42% over FY20.
We conservatively factor in higher credit cost of 100/80bp over FY20/21, resulting in an 8%/3% cut in our FY20/21 earnings estimates. We, nevertheless, estimate IIB to deliver FY20/21 RoA of 2.0%/2.1% and value the stock at INR1,900 (3x FY21E ABV).
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