Prabhudas Lilladher's research report on IndusInd Bank
IIB’s earnings at Rs13.6bn (PLe: Rs11.7bn) were a beat to estimates driven by higher loan growth of 12.4% YoY and the resultant fee income, better NII and lower provisions. While gross slippages were a bit higher at 3.7% of loans (bulk from retail), healthier recoveries as a result of enhancing collection efficiency across segments drove sequential asset quality improvement. We believe recovery trends could sustain while slippage run-rate should moderate in-line with management guidance as bulk of the stress has already been recognized. The telecom exposure has been fully provided for while real estate has been performing well. With a stronger balance sheet focus is back on credit growth. We expect a loan CAGR of ~15% over FY22-24E with declining provision costs, while expanding LDRs over the same time frame might drive uptick in margins.
RoE may scale up from 10% in FY22 to 15% in FY24E. With most of the fundamental issues being addressed, valuation discount of IIB to its larger peers should narrow. We retain ‘BUY’ with TP of Rs1,297 based on 1.8x FY24E ABV .
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