Buy IndusInd Bank; target of Rs 397: KRChoksey

KRChoksey is bullish on IndusInd Bank (IIB) and has recommended buy rating on the stock with a target of Rs 397 in its April 20, 2012 research report.

“IIB reported excellent operating performance with PAT of Rs 223crore (up 30.1% y-o-y and 8.5% q-o-q), in line with our expectation and above street’s expectation. NII grew 19.7% y-o-y & 8.5% q-o-q driven by strong loan growth 8.1% q-o-q and marginal improvement in NIMs (4bps q-o-q). Core fee income continued to show strong momentum growing by 60.1% y-o-y & 10.2% q-o-q led by strong growth in IB, processing fees and third party distribution. Loan growth was at 34.0% y-o-y and 8.1% q-o-q, outpacing sector growth aided by strong growth in retail loan book (48.4% y-o-y & 9.8% q-o-q). Deposits increased 23.3% y-o-y and 4.4% q-o-q, CASA ratio showed marginal uptick 77bps q-o-q led by strong traction in saving deposits (up 18% q-o-q). Given the tough macro environment, asset quality has been fairly stable during the quarter with Net NPAs at 0.27%. The bank has opened 35 branches taking total branches to 400 with 700 ATMs. Upgrade BUY.”
“Net interest income grew 19.7% yo- y & 7.8% q-o-q led by strong loan growth 34.0% y-o-y & 8.1% q-o-q. NIM expanded 4bps q-o-q to 3.29% due to strong growth in retail loans and 77bps q-o-q increase in CASA ratio. The management has guided us that net interest margins are likely improve driven by downward trend in cost of funds & 49% retail fixed rate book and strong CASA growth in falling interest rate environment. We believe higher proportion of fixed rate loan book (49%) would be key catalyst to earnings growth in rate easing cycle, positively impact NIMs. Core fee income showed strong growth momentum (up 60.1% y-o-y and 5.4% q-o-q) driven by processing fees, investment banking and distribution income. Core fee income contributes 90% and 35% to non interest income and operating revenues respectively. Trading gains stands at 9.4% of non interest income, up 109.4% q-o-q to Rs27.4crore. The management expects core fee income continues to grow higher than balance sheet growth over FY12-14. We are factoring 37.7% CAGR in fee income over FY11-FY14e.”
“Indusind Bank delivered another excellent operating performance during the quarter. Healthy NII growth, robust core fee income growth, strong loan growth led by retail loan book and stable credit costs were key highlights from the result. We expect IIB to deliver 28.8% CAGR in earnings over FY12-FY14. At Rs 345 the stock is trading at 3.0x FY13 ABV and 15.3x FY13 earnings. We expect RoA and RoE to remain at healthy level of 1.6% and 20.5% respectively in FY13. We believe strong loan growth, robust core fee income growth, healthy asset quality trends and superior RoEs would sustain higher valuation multiple (3-3.5x) in medium term. We upgrade our investment rating on the stock from HOLD to BUY with revised TP of Rs397,” says KRChoksey research report. Public holding more than 90% in Indian cos Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions. To read the full report click on the attachment

Read More