Buy IndusInd Bank; target of Rs 1400: Sharekhan

Sharekhan's research report on IndusInd Bank

IndusInd Bank reported strong earnings growth in Q4FY23 with PAT at Rs. 2,041 crore (up 50% y-o-y/ 4% q-o-q) led by a ~30% y-o-y decline in provisions and ~13% y-o-y growth in operating profit. Healthy loan growth (of 21% y-o-y/ 6% q-o-q), stable NIMs, strong core fee income traction (27% y-o-y/ 8% q-o-q and a decline in provisions drove up ROA to ~1.9%. Total slippages rose by 9% q-o-q (~2.7% cal. based on trailing 12M loans annualised versus 2.6% q-o-q) mainly led by MFI segment and one corporate restructured account. However, asset quality continued to improve led by strong recoveries and upgrades along with contained write offs.

Outlook

The bank is guiding for the sustained improvement in earnings growth trajectory over the next 3 years. We believe strengthening retail & granular liability franchise would be most important factor. At CMP, IIB trades at 1.3x/ 1.2x its FY2024E/ 25E BV. We maintain Buy with an unchanged PT of Rs. 1,400.