IndusInd Q3 in line, maintain buy on stock: ICICI Direct

Private lender IndusInd Bank met Street expectations by reporting a 28.8 percent growth in profit at Rs 447 crore for the quarter ended December 2014, supported by higher other income, net interest income and lower provisions.

In an interview to CNBC-TV18, Kajal Gandhi, AVP Research, ICICI Direct, said the numbers are in line, especially the bottomline, though they it has come marginally lower on the NII front.

ICICI Direct remains positive on the stock and maintains a buy.

Below is the transcript of Kajal Gandhi’s interview with Nigel D’Souza and Ekta Batra on CNBC-TV18.Ekta: What is your sense on the numbers, inline? A: Yes broadly, on the bottomline inline with estimates. Marginally lower on the net interest income (NII) front. However, overall the results seem to be on a stable quarter. Nigel: What was the NII you were estimating? A: We were expecting 20 percent kind of growth Rs 880 crore around. So, that is slightly on the lower side. Ekta: What do you think the other income components comprised of this time according to you, where there any treasury gains that you were factoring in? A: We were factoring but it has come still higher. We expected Rs 580 crore on the other income and it has come on Rs 610 crore. So, there is marginal increase in that. That is one of the highest in their last several quarters, the other income number. Ekta: What do you think fueled it this time? A: It must be one which can be on the side of treasury gains. Also it can be that if there is good other income from the fee based income because it seemed that this quarter third party sales has happened in slightly better manner, across. So, maybe some fee income push would have been one of the reasons. Ekta: The stock is already trading at very expensive valuations, around 3.5 times its FY16 book value or maybe even above that at this point. Do you think that there is further room for an upside in terms of the stock price for IndusInd Bank?A: At FY16 valuations at is looking marginally expensive but we do expect now in quarters time there is a rolling over to FY17 which the market is looking at and from that angle it will come down to roughly around 3-3.1x, the book which will again create the room for the upside. So, we believe the stock should remain on the positive territory considering the margins and the bottomline performance that the company is giving. Nigel: What is your take on the stock, what is the house view on the stock currently? A: We have a buy on the stock.Nigel: Target price? A: Target we will be revising. It is the current market which has been the target in the current time but then we will be revising upwards. Ekta: Provisions have jumped around 33-34 percent sequentially does that worry you at all? A: No, we were also factoring around Rs 91 crore on the provision side and provisions because last quarter was only lower otherwise they had a trend of Rs 100-110 crore previously. Ekta: Wanted your sense in terms of how would you rate the entire set of numbers this quarter, good, bad, above estimates, below estimates, inline? A: I think good numbers but inline with estimates because market wasn’t anyways expecting a haywire performance on these numbers. So, I think a stable quarter on the cards.