Buy IndusInd Bank; target of Rs 1200: Sharekhan

Sharekhan's research report on IndusInd Bank

IndusInd Bank’s operating performance and asset quality remained weak on expected lines. Credit cost was below estimates, as the bank used contingent provisions (~Rs. 200 crore). Thus, reported PAT at Rs. 1401 crore was above estimates. Besides elevated stress in MFI and credit cards, there was a sharp rise in delinquencies in the tractor, two-wheeler, CVs, and corporate segments; however, the bank expects stable asset quality in the secured asset segment going forward. Stress is likely to persist in MFI/credit card book over the next two quarters. The bank has guided that it is still too early to call for a firm recovery in MFI.

Outlook

Valuations clearly factor in the key risk and near-term volatility in key operating parameters. Gradual improvement can be expected from H2FY2026, but near-term key monitorable is the RBI’s approval on the extension of the CEO’s tenure. We maintain BUY with a revised PT of Rs. 1,200. At the CMP, the stock trades at 1.1x/1.0x/0.9x its FY2025E/FY2026E/FY2027E BV.