Buy IndusInd Bank; target of Rs 2000: Emkay Global Financial

Emkay Global Financial's research report on IndusInd Bank

IndusInd Bank (IIB) posted a slight (4%) miss on earnings with Rs23.5bn PAT/1.9% RoA (reported), due to some moderation in growth (18% YoY), as also in margin (down by 3bps QoQ to 4.26%). Asset quality took a breather, with slippages down QoQ to Rs14.3bn/1.75% of loans, leading to nearly stable GNPA/NNPA ratio at 1.9%/0.6% of loans. Bank retains medium-term credit growth guidance at 18-22%, with clear focus on diversifying its portfolio, including mortgages and non-vehicle loans. Within Vehicle loans, Bank has gradually moved away from MHCVs and thus reduced cyclicality. Also, Bank would maintain focus on retailization of deposits and invest in the phygital infrastructure. Bank plans to maintain 1.5% of its MFI book and 0.5% of MHCV book as contingent buffer at any given point in time, with contingent buffer (Rs10bn/0.3% of loans) well ahead of the requirement.

Outlook

We trim our earnings by ~3%/7% for FY25E/26E, factoring-in the moderate growth, while we expect the bank to report healthy RoA/RoE at 1.9-2%/16-17% over FY25- 27E. We maintain BUY on IIB and our TP of Rs2,000/share, implying 2.2x FY26E ABV.