Accumulate IndusInd Bank; target of Rs 2033: KR Choksey

KR Choksey's research report on IndusInd Bank

Advances grew by 29% yoy/4% qoq to INR 1507 bn, led by 30.4% growth in corporate banking and 28% growth in consumer finance. NIMs at 3.92% contracted by 5 bps points largely due to increase in cost of funds. The banks expects NIMs to be in the range of 3.9-4% going forward. NII at INR 21.2 bn grew by 20% yoy/6% qoq (in line with expectations) while non-interest income at INR 13 bn was up 12% yoy. Fee income at INR 11.7 bn grew by 20% yoy. Opex growth came in lower than income growth, resulting in PPOP of INR 19.1 bn, +20% yoy/+8% qoq.

Outlook

Overall improvement in the credit book profile should translate into lower credit costs. We expect bank to deliver ROE of 17.6%/18.7% in FY19/20E. We value the bank at 4.5x FY19E ABV of INR 452 per share, translating into a target price of INR 2,033 per share. We recommend ACCUMULATE.