Buy Indusind Bank; target of Rs 1278: Reliance Securities

Led by robust growth in balance sheet along with healthy growth in NII and fee income, net profit of IndusInd Bank (IIB) came in line our expectation in 1QFY17. Its NII grew by strong 38.3% yoy & 7.0% qoq to Rs13.6bn led by robust growth in advances and improvement in reported NIMs. Overall, the Bank’s business growth improved as credit grew by 29.7% yoy & 5.9% qoq and deposits surged by 31% yoy & 9.4% qoq. Loan book growth was led by 30% yoy growth in corporate loan book and 29% yoy growth in consumer book.  Fresh slippages declined to Rs940mn in 1QFY17 compared to Rs2.7bn in 4QFY16. However, headline gross NPA increased by 10.8% qoq to Rs8.6bn due to relatively lower sale to ARC. PCR remained at a healthy 58.7% level in 1QFY17 compared to 58.6% in 4QFY16 & 60.6% in 1QFY16.

 

The Bank is well on the track to achieve the target set for Planning Cycle-III by consistently achieving its short-term and medium-term goals. As the Bank’s total branch count is expected to reach 1,200 by FY17E-end, we believe that it is likely to sustain strong growth in CASA deposits as well as fee income. Stress in CV/consumer finance portfolio will also come-off due to improved operating environment. We continue to recommend BUY on the stock with a revised Target Price of Rs1278 based on 3.3x FY18 Adjusted Book Value.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.