Buy Indusind Bank; target of Rs 1143: KR Choksey

Driven by robust business momentum, enhanced liability franchise and controlled asset quality, IndusInd Bank (IIB) has put out an all-round performance for first quarter of FY17.  Superior margins supported by CASA enhancement and declining slippage trend coupled with healthy retail loan mix aided strong NII expansion and thereafter robust operating performance. The core operating performance continues to be intact with sturdy 34% y/y operating profit growth. Subsequently, PAT at INR 6613 mn grew healthy 26% y/y growth, in-line with our expectations. Had it not been for the elevated provisioning against one stressed account, net profit growth could have further climbed to 30% levels on y/y basis. While asset quality reported tad deterioration, the headline numbers stood well in control and were restricted little below 1% levels. Operationally, the bank has delivered another strong & consistent quarter.

 

IIB is seemingly mirroring the quality depicted by couple of top league private banks. Hence, the bank continues to demand higher multiples and has enjoyed re-rating good number of times. While the stock has run-up another 20% odd over the last quarter on expected lines, given the further scope for NIM expansion, strong growth visibility with higher RoAs, we believe it deserves a higher multiple. While historically, IIB has traded quite on a higher note, we tweak the multiple for the bank at 3.5x P/ABV FY18E arriving at a target price of INR 1352 (earlier INR 1203). The stock is currently trading at 3.4x P/ABV FY17 and 3.0x P/ABV FY18E. MAINTAIN BUY. For all recommendations, click here 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.