Buy Indusind Bank; target of Rs 1203: KRChoksey

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26 Aug, 2025 12:21

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KRChoksey's research report on Indusind BankIn another consistent quality performance, IndusInd Bank delivered strong core operating performance with PAT of INR 5810 mn (Up 29.9% Y-o-Y & 3.7% Q-o-Q), absolutely, in-line with our expectations on the back of robust loans and fees; asset quality stable.Key highlights: 1) NII grew 36.2% Y-o-Y & 7.2% Q-o-Q driven by 29% Y-o-Y growth in loan book and stable NIMs. 2) Non-interest income grew strongly by 37.4% Y-o-Y driven by robust growth in fees (+29% y/y; core fees growth +29% y/y) and sturdy trading gains (up 28% y/y). Robust growth in trade fees, loan processing fees, investment banking gains coupled with strong growth in financial product distribution fees have supported robust core fee income growth. 3) Asset quality ratios stood tad higher, fresh slippages for the stood at 2.5 bn v/s 1.89 bn in Q2FY16 and provisions spiked almost 80% y/y; that said, the broad level asset quality trends appear to be stable for the bank with PCR standing strong at 60% and restructured stock at 0.58% of the total loan book. 4) Loan book growth continued to be strong at 29% Y-o-Y & 5% Q-o-Q due to a pick up retail book which grew at 27% Y-o-Y and 7% Q-o-Q, while the corporate book continued to support by growing at 30% Y-o-Y and 3% Q-o-Q. 5) CASA ratio improved to 35% driven by healthy SB deposit growth (+32% y/y, 7% q/q) aided by CA deposits (+8% q/q). 6) The management has indicated a pickup in CV cycle with the MHCV segment showing improvement and 2-wheelers reporting gradual uptick during the quarter. 7) CAR at 16.43% stands one of the highest in the industry. 8) Operationally, the bank has delivered another strong & consistent quarter.Indusind Bank has delivered another quarter of strong and consistent operating performance. . Improving loan book growth outlook aided by better growth in retail loans, falling funding costs & better loan book mix supporting NIM improvement and recovery in CV book both in terms of growth & asset quality have been the key catalysts to growth. By virtue of successful track record of growth and profitability and capital efficiency, 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. Rich liability franchise, robust return ratios, stable asset quality and comfortable capital position (Tier I-16%) reinforces our belief in the sustainable superior earnings performance warranting premium valuations. The stock is currently trading at 2.4x P/ABV FY18E and we value the bank at 3.11x P/ABV FY18E arriving at a target price of INR 1203. We also introduce FY18 estimates into our numbers. 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.

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