Buy Indian Bank; target of Rs 900: Emkay Global Financial

Emkay Global Financial' research report on Indian Bank

Indian Bank (INBK) maintains its superior performance, with PAT at Rs30bn and RoA at 1.3%, backed by strong growth of ~14% YoY, stable margins (@3.2%), and contained provisions. Despite the steady improvement in asset quality, INBK made prudent standard provisions of Rs1.8bn/13bps of loans and some ECL buffer on stage 1&2 assets. INBK expects growth momentum to remain healthy, and NIMs to moderate a bit in 3Q due to MCLR down-pricing and then stabilizing at 3.2-3.3%. The bank has positively revised its GNPA ratio guidance to <2% from <3%, given benign asset quality outcomes. Considering its higher specific PCR of 94% and additional provision buffers against restructured/standard loans, we believe impact of ECL norms could be the lowest for INBK among PSBs.

Outlook

Factoring in its consistently superior RoA/RoE delivery (1.2-1.3%/16-18%), best-in-class asset-quality performance, strong capital buffer, and credible management, we retain BUY while hauling up our TP by 20% to Rs900, and now value INBK at 1.3x Sep-27E ABV (vs 1.2x earlier).

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