IndusInd Bank stock gains 2% on decent Q1 show, analysts find valuations attractive for re-rating

So far this year, shares of IndusInd Bank declined over 12 percent, underperforming benchmark Nifty 50's 14 percent rise

Shares of IndusInd Bank rose over 2 percent to Rs 1,436 apiece on July 29 after the private lender reported decent Q1FY25 results. Although brokerages remain bullish due to attractive valuations, they lowered target prices as Q1 earnings missed estimates.

IndusInd Bank posted a 2 percent year-on-year (YoY) growth in profit to Rs 2,171 crore in Q1FY25, falling short of Moneycontrol's forecast of Rs 2,370 crore. Net interest income (NII) grew by 11.1 percent YoY to Rs 5,408 crore, missing the estimated Rs 5,533 crore.

Following this, Jefferies reduced the target price of IndusInd Bank stock to Rs 1,750 from Rs 1,940 but maintained a 'buy' rating, citing softer topline growth due to slower growth and margins.

IIFL Securities also cut IndusInd's target price to Rs 1,620 from Rs 1,650, pointing to muted loan growth in high-yielding segments and softening asset quality. However, they maintained a 'buy' rating, expecting a gradual re-rating as the rate cut cycle progresses.

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Nuvama Institutional Equities lowered the target price to Rs 1,690 from Rs 1,800 due to misses in NII, fees, and rising slippages, but retained its 'buy' rating given the stock's sharp correction.

Nomura maintained a 'neutral' rating and reduced the target price to Rs 1,580 from Rs 1,650, citing softer loan and deposit growth.

Operationally, IndusInd Bank's loans grew by 15 percent YoY to Rs 3.4 lakh crore, and deposits increased by 15 percent YoY to Rs 3.9 lakh crore in the quarter ended June. The loan-to-deposit ratio (LDR) stood between 86.5-87.2 percent, which is considered stable.

However, the bank's net interest margins (NIMs) were rangebound at 4.25 percent in Q1FY25, down 4 basis points YoY amid higher funding costs. The management said that the NIM contraction was limited as higher funding costs were offset by high yielding assets. They expect margins to remain rangebound going forward as well.

So far this year, shares of IndusInd Bank declined over 12 percent, underperforming benchmark Nifty 50's 14 percent rise.