Buy IndusInd Bank; target of Rs 1270: Sharekhan

Sharekhan's research report on IndusInd Bank

IndusInd Bank (IIB) expects to have recovered from the past challenges and has taken learnings from the past to improve and put adequate risk controls in place for future. The bank is guiding for strong loan growth momentum outlook across consumer and corporate book. The bank intends to achieve loan mix of 60:40 (retail-corporate) from the current mix of 54:46. However, the restructured book (2.1% of advances) is higher for the bank, given the higher share of CV and microfinance portfolio. The bank has guided that it is likely to see most of the restructured book run down by FY2023-end and the risk of higher slippages compared to the past quarter gone by looks unlikely. Management also indicated that it would continue to focus on strengthening its liability franchise. The bank has been improving the granularity of its deposit book. Retail LCR has gone up from ~26% in FY2019 to ~41% in FY2022.

Outlook

At the CMP, IIB trades at 1.5x and 1.3x its FY2023E/FY2024E BV. We maintain Buy with a revised TP of Rs. 1,270.