Facebook Pixel Code

IndusInd Bank target price stays at Rs. 401

Earnings of IndusInd Bank did not surprise us much, coming in at Rs. 236 crore, which was in line with our estimate.

Earnings of IndusInd Bank did not surprise us much, coming in at R236 crore (31% y-o-y growth), which was in line with our estimate.

Most of the parameters remained stable, including loan growth, fee growth, costs and asset quality, except for NIM, which was slightly weak given the continuing tightness in rates in Q1. The stock ended flat over the previous close.

Loan growth remained healthy at 31% y-o-y, with growth continuing to be driven by the retail segment. The book is now evenly split between the corporate and retail segments. The commercial vehicle (CV) segment continued to show resilience, up 44% y-o-y despite weaker CV industry growth as it gained further market share in new as well as used CV segment. Deposit growth picked up this quarter, with savings account (SA) deposits growing 59% y-o-y, aiding current account, saving account (CASA) growth.

However, given the tight monetary conditions, funding costs rose by 35 bps versus a 27 bps rise in yields, leading to a small decline of 7 bps q-o-q in margins, to 3.22%. Broadly, over the past three quarters, margins have remained fairly stable at c3.25%.

Fee income continued its trend of outgrowing the loan book, up 44% y-o-y, helping to offset the margin pressure. Robust asset quality, with gross non-performing loans (GNPL) at 0.97% and zero additions to the restructured book (restructured advances at 24 bps) was a major positive, given the tough macro-economic environment domestically.

IIB trades at 12-month forward multiples of 2.8x PB and 13.6x PE. With the company?s fundamentals still impressive in the current tough macro-environment and given the company?s strong top management, we keep our 12-month target PE at 15x and PB at 3x, for an unchanged target price of R401. We reiterate our overweight on the stock and believe that IIB?s superior growth, asset quality and profitability profile will support its premium multiples. Key downside risks are macro headwinds and higher-than-expected slippages and credit costs.

Get live Share Market updates, Stock Market Quotes, and the latest India News and business news on Financial Express. Download the Financial Express App for the latest finance news.

First published on: 12-07-2012 at 00:17 IST
Market Data
Market Data
Today’s Most Popular Stories ×