Hold IndusInd Bank; target of Rs 1550: ICICI Direct
ICICI Direct’s research report on IndusInd Bank
IndusInd Bank has reported operational performance, post-merger of Bharat Financial Inclusion for the first time. Hence, numbers are not comparable. Business traction continued to remain stable at 27%YoY. Credit growth came in healthy at ~28% YoY to Rs 193520 crore; while growth in Bharat Financial remained slow. Consumer Finance (ex- business banking & MFI) grew at steady pace of ~24% YoY, driven by healthy growth of 24% YoY in auto loan book despite lacklustre auto sales. Reclassification of business banking & MFI into consumer finance led to sharp surge of 73% YoY. Corporate segment (ex- business banking & MFI) grew slower at ~20% YoY. Healthy CASA growth of 25% YoY & healthy traction in retail term deposit aided bank to maintain 26% YoY growth in deposits.
Accordingly, we downgrade our rating to HOLD from BUY. We revised price target to Rs 1550 (earlier Rs 1860) valuing the stock at ~2.5x FY21E ABV as higher multiples of past look unjustifiable at current juncture. Management succession post Mr. Ramesh Sobti’s term continues to remain as a key overhang on the stock.
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