Buy Indian Bank; target of Rs 225: Emkay Global Financial

Emkay Global Financial is bullish on Indian Bank has recommended buy rating on the stock with a target price of Rs 225 in its research report dated July 20, 2021.

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Emkay Global Financial’s report on Indian Bank

Indian Bank has benefited the most from the merger with Allahabad Bank(CASA@41%) and has largely completed the integration process. It is now gearing up to accelerate growth with a strong capital buffer (CET 1 of 11.6% post recent QIP). We expect a sharp improvement in RoE to 13% by FY24E from 4% post-merger in FY20. We upgrade it to Buy with a revised TP of Rs225 (0.7x Jun’23E ABV). In Q1, the bank once again delivered a strong beat on PAT at Rs11.8bn (est. Rs7.7bn), mainly driven by better NIMs, higher other income, and tax reversal benefits from c/fwd accumulated losses. Despite higher slippages (mainly in SME), GNPA moderated further to 9.7% due to aggressive w-offs.

Outlook

We expect a sharp improvement in RoE to 13% by FY24E from 4% post-merger in FY20. We upgrade it to Buy with a revised TP of Rs225 (0.7x Jun’23E ABV).

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