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Apr 21, 2017 12:01 PM IST | Source: Moneycontrol.com

Buy Indusind Bank; target of Rs 1560: Edelweiss

Edelweiss is bullish on Indusind Bank has recommended buy rating on the stock with a target price of Rs 1560 in its research report dated April 19, 2017.

Buy Indusind Bank; target of Rs 1560: Edelweiss

Edelweiss' report on Indusind Bank


While headline asset quality was stable (GNPLs at 93bps), credit cost increased as IIB made one-off provision (INR 1.2bn) against a large corporate standard asset (INR5bn exposure). The bank highlighted this was for a bridge loan for a Merger & Acquisition in cement industry, which is expected to be done by Q1FY18 and consequently is hopeful of reversal. IIB maintained its guidance of delivering sub-60bps credit cost for FY18.


Outlook


IIB intends to lower cyclicality in business by: a) lowering CV proportion (by raising proportion of non-vehicle retail book); and b) moving towards better rated corporates, drawing support from strengthened liability franchise (lower funding cost). Superior growth, higher fee income and stable credit costs will help it sustain >25% earnings CAGR over FY17-19E. The stock trades at 3.1x FY19E P/ABV. We maintain ‘BUY/SP’ with TP of INR 1,560 (3.5x FY19E P/ABV).


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