Buy IndusInd Bank; target Rs 460: ICICIdirect.com
ICICIdirect.com is bullish on IndusInd Bank (IIB) and has recommended buy rating on the stock with a target price of Rs 460 in its October 16, 2013 research report.
October 17, 2013 / 17:46 IST
ICICIdirect.com's technical breakout on IndusInd Bank (IIB)
"IndusInd Bank (IIB) augmented itself from low and volatile B/S growth to steady and sustainable growth with strong profitability. The bank earns one of the best RoAs in the industry at ~1.6 percent. Strong management pedigree remains a key strength of the bank that has driven a sharp improvement in all core parameters since it took over in FY08. We like the fact that the transformation has been a qualitative one (RoA up from 0.3 percent to 1.6 percent as on FY13) despite the turbulent economic scenario. We believe IIB is well set for another phase of healthy business and PAT growth. Earnings visibility remains healthy (though lower than previous trends) at 26 percent CAGR over FY13-15E to Rs 1673 crore despite factoring in lower NIM, business growth combined with higher credit cost than indicated by the management.""IIB has developed a sound business model over the years wherein it has a high yielding and well diversified asset portfolio on the one side and an improving liability franchise on the other. The asset book is evenly divided between consumer finance (CF) (~80 percent of which is the high yielding vehicle finance) and corporate banking (CB) (working capital in nature and well diversified across industries). Further, the CASA franchise has doubled to 30 percent over FY08-13. IIB has managed to deliver superior business growth (25 percent CAGR in five years) along with impeccable asset quality (GNPA at ~1 percent in the past three years) and strong margins (3.6 percent+ in FY11-13).""IIB’s management under Mr Sobti has displayed strong execution capabilities as evidenced by successful accomplishment of planning cycle I (FY08 -11) and Planning cycle II (FY11–14) till now. We believe IIB is well positioned to tread Planning cycle III (2014–16) but considering current weak economic outlook, we have built in conservative estimates than guided. We anticipate advances CAGR of 21 percent in FY13-15E to Rs 65100 crore, NIMs to moderate to 3.6 percent from 3.7 percent levels (owing to rise in short-term rates) and credit cost to rise 10 bps to 70 bps (concerns on CV portfolio seen). Overall, PAT is likely to grow at healthy 26 percent CAGR over FY13-15E.""At the CMP of Rs 407, IIB is trading at 2.2x FY15E ABV of Rs 188. Considering the management stability and consistent growth that the bank is demonstrating, we value IIB at 2.4x FY15E ABV (last one, three year average at 2.6x, 2.4x), a discount of 23 percent to HDFC Bank. We arrive at a target price of Rs 460, providing an upside of 13 percent. We remain positive on the business model and initiate coverage on IIB with a BUY rating," says ICICIdirect.com research report.Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions. 
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