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Buy IndusInd Bank; target of Rs 1640: Prabhudas Lilladher

October 11
12:25 2019

Prabhudas Lilladher’s research report on IndusInd Bank

IIB profitability of Rs13.8bn (PLe: Rs15.3) was lower than estimates mainly on back of marginally slower PPOP and higher provisions undertaken to enhance PCR from the benefit of lower tax rate. Few disappointments have been on (i) sharp slowdown in loan growth rate to 21% YoY and only 14% YoY loan growth if BHAFIN book is used to rebase (ii) Higher slippage than run rate in both corporate/consumer and (iii) doubling of SMA 1&2 ratio albeit small at 38/58bps. Although there were few positives as well (i) Bank used lower tax rate benefit to enhance PCR by 600bps QoQ to 50% and (ii) NIM improved by 5bps (from IIB portfolio). Concerns on additions to stress from certain corporate groups remains on top of any investment thesis in the near term, although lowering existing stress proportion through repayments should provide confidence of lower translation to NPAs.

Outlook

We maintain BUY with TP of Rs1,640 (Rs1,832) based on 2.5x (from 2.7x) Sep FY22 ABV.

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