Buy IndusInd Bank; target of Rs 1861: KR Choksey

KR Choksey's research report on IndusInd Bank

Advances grew 28.6% YoY/7.6% QoQ in Q4FY19, driven by both consumer finance loans and corporate sector lending which grew by 27% YoY and 20% YoY, respectively in Q4 FY19. Deposit mobilization remained robust with growth of 28.5% YoY/10.9% QoQ. CASA grew a healthy 26% YoY in Q4 FY19. NII stood at INR 2,232 Cr recording a growth of 11.2% YoY/ down 2.4% QoQ while NIMs stood at 3.57%, a decline of 48 bps YoY/ 31 bps QoQ. The bank has provided for INR 1,561 Cr of net provisions during the quarter, up 365% YoY/ 157% QoQ; impacted due to a one-off de-recognition of interest & provisioning of INR1,273 Cr with respect to exposure to infrastructure sector. In terms of Asset quality, GNPAs at 2.1%, increased by 93 bps YoY / +97 bps QoQ; while NNPAs at 1.21% was 70/62 bps higher on YoY/QoQ basis. Overall, PAT at INR 360 Cr was down by 62.2% YoY/down 63.4% QoQ in Q4FY19. Excluding the one-off impact, PAT grew by 25% YoY/+3% QoQ. The Board declared a dividend of INR 7.50 per equity share of face value of INR10 for FY19.

Outlook

We apply a P/Adj.BV multiple of 3.35x to the FY21 adj. BVPS of INR 556 to arrive at a target price of INR 1,861 per share, an upside of 16.5% over the CMP. Accordingly, we assign a “Buy” rating on the shares of IndusInd Bank.