Buy Indian Bank; target of Rs 194: Magnum

Magnum is bullish on Indian Bank and has recommended buy rating on the stock with a target of Rs 194 in its August 9, 2012 research report.

“Indian Bank has reported good set of numbers in Q1FY13 with the Income and Net Profit has shown a good performance with the NPAs came down significantly. Outlook on an asset quality continues to remain confident with decent improvement and recovery in the forthcoming quarter. At CMP of Rs 175, it is trading at an adjusted P/BV of 0.7x FY13E BV of Rs 243. We have valued the Bank at P/BV of 0.8x FY13E & maintain our BUY rating on the stock with a target price of Rs 194.00 with an upside potential of 11% from current levels. The current NIM of 3.30% is an improvement from Q4FY12 when it was down due to reversal on the NPA accounts. So, the NIM has been maintained better than in Q4FY12. Indian Bank has reduced the base rate by 25 bps from 10.75% to 10.50% and management is confident that the NIM for the entire fiscal should be around 3.25%.”

“Net Profit for Q1FY13 amounted to Rs 462 crore as compared to Rs 345 crore in Q4FY2012, registering agrowth of 33.7% sequentially. In Q1FY12, Net Profit was at Rs 407 crore. Operating profit increased to Rs 840 crore in Q1 FY13 as compared to Rs 781 crore in Q1 FY12, registering 7.6% growth. Total Income increased by Rs 566 crore to Rs 3,597 crore, led by y‐o‐y growth of 21.3% in Interest Income. Net Interest Income rose by 12.0% on y‐o‐y basis to reach Rs 1,153 crore in Q1 FY13.Total Business of the Bank rose to Rs 220,888 crore as compared to Rs 192,934 crore in June 2011. Deposits at the end of June 2012 amounted to Rs 127,012 crore against Rs 110,425 crore in June 2011 (a growth of 15% y‐o‐y basis). CASA Deposits improved to Rs 36,871 crore in June 2012 from Rs 33,441 crore in June 2011, recording a growth of 10.3%. Advances at Rs 93,876 crore as on 30.06.2012 grew by 13.8% (y‐o‐y) as against Rs 82,510 crore as on 30.06.2011. Credit Deposit Ratio was at 73.9% as against 74.7% in June 2011.”

“Indian Bank has reported good set of numbers in Q1FY13 with the Income and Net Profit has shown a good performance with the NPAs came down significantly. Loan Provision Coverage Ratio of the Bank as on30.06.2012 stood at 75.08% as against 70.18% as on 31.03.2012 (minimum norm stipulated by RBI is 70%). Outlook on an asset quality continues to remain confident with decent improvement and recovery in the forthcoming quarter. At CMP of Rs 175, it is trading at an adjusted P/BV of 0.7x FY13E BV of Rs 243. We have valued the Bank at P/BV of 0.8x FY13E & maintain our BUY rating on the stock with a target price of Rs194 with an upside potential of 11% from current levels,” says Magnum research report.

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