Buy IndusInd Bank; target of Rs 1800: Emkay Global Financial

Emkay Global Financial's research report on IndusInd Bank

IndusInd Bank (IIB) reported largely in-line PAT at Rs21.2bn (up 30% YoY)/RoA at 1.8%, led by healthy credit growth/NII and lower LLP, as the bank continued to utilize the contingent buffer of up to Rs2bn during 1Q; the buffer now stands at Rs17bn/0.6% of loans. Amid decelerating margins across banks (ex-HDFCB), IIB retained NIM at ~4.3% in 1Q. Going ahead, Bank targets accelerating its retailization strategy, which should keep margins/core-profitability healthy. Asset quality too is on the mend which, coupled with healthy PCR/contingent buffer, should lead to moderation in LLP and thus drive-up RoA/RoE to 1.8-1.9%/16-18% over FY24-26E. We believe that concerns around the MD’s shorter-tenure are largely behind, while stock performance will hereon track the improving growth (>20%), asset quality and RoA/RoE trajectory. Despite the recent run-up in the stock, IIB is trading at reasonable valuations — 1.6x its FY25E ABV.

Outlook

We value the stock at 2x Jun-25E ABV and revise the TP to Rs1,800/share (vs Rs1,600). We retain BUY on the stock.