Motilal Oswal is bullish on IndusInd Bank
and has recommended buy rating on the stock with a target of Rs 500 in its December 28, 2012 research report.
“IIB continues to enjoy strong growth (35%+ CAGR over last three years) and superior asset quality (GNPA of 0.8%) in CV loans (24% of total book), despite sector slowdown. The underlying success factors are: (1) strong credit appraisal, (2) high repeat business, and (3) focus on the lower-stress SRTO segment (small road transport operators). In corporate loans segment, IIB's asset quality is helped by (1) diversified loan book, and (2) low proportion of term/unsecured loans. Management is confident of maintaining healthy loan growth of 25-30% and superior asset quality (which would keep credit cost under control).”
“We expect IIB to be a key beneficiary of likely reversal in interest rate cycle in 4QFY13 - high-cost deposits will be re-priced at a lower rate, whereas higher mix of fixed rate loans (~50% of overall) implies lower decline in yields. Further, improving CASA ratio and recent capital infusion of INR20b would help margin expansion. Expect 2HFY13 margin to improve ~40bp+ over 1HFY13; FY14 margin to further improve 20bp YoY on the back of capital raising and higher CASA ratio. Rapid branch expansion (to 441 from 210 in FY10), product innovation and higher interest rate on savings deposits has led to 75%+ increase in new customers (average of 0.08m in FY11 v/s 1.45m in 2HFY13). This is positive for CASA and fee income generation through cross selling of third party products.”
“We upgrade IIB's FY14 EPS by 8% to factor in higher margins. Our comfort with IIB is based on: (1) Strong capitalization (15%+ Tier I post 10% equity dilution), (2) Healthy business growth (25%+), (3) Margin expansion, and (4) Healthy asset quality outlook. Maintain Buy with a revised target price of INR500 (3x FY14BVE), 20% upside,” says Motilal Oswal research report.
FIIs holding more than 30% in Indian cos
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