Buy Indian Bank; target of Rs 410: Cholamandalam Securities

Cholamandalam Securities' research report on Indian Bank

Indian bank’s total advances grew at a healthy 22.8% YoY (vs. CSEC estimate of 23.7%) to INR 1.64tn. The domestic loan book grew by 23.7% YoY (1% QoQ), driven by growth in RAM (Retail Agricultural and MSME) segment up 26.8% YoY (3.1% QoQ). Corporate & Commercial segment also saw a growth of 19.9% YoY. Management has guided loan book growth of ~20% in FY19E, driven entirely by the RAM segment.

Outlook

The bank has shown strong performance driven by margin expansion and relatively lower slippages (in normal course). Superior asset quality amongst its PSU peers, strong loan growth trajectory coupled with lower costs and margin expansion paints a positive outlook for the bank. Hence, we maintain a BUY rating with a target price of INR 410, assigning a P/ABV of 1.2X FY20E.