Buy IndusInd Bank; target of Rs 1350: ICICI Direct

IndusInd Bank’s operating performance continued to remain strong with 25.8% YoY PAT growth to Rs 704 crore. The bank remains one of the few banks delivering consistently on the operational front Advances growth continued to remain strong at 26.4% YoY to Rs 98949 crore (I-direct estimate: Rs 99596 crore). Among segments, consumer finance as well as corporate segment growth remained healthy at 27% and 26% YoY, respectively. In consumer finance, non vehicle loans (including credit cards, LAP and personal loan) grew at a faster rate above 35% Asset quality remained stable during the quarter. Total slippages remained flattish at Rs 261 crore, mainly led by lower slippages from the corporate segment at Rs 73 crore vs. Rs 94 crore in Q1FY17. However, slippage from consumer segment increased to Rs 188 crore vs. Rs 159 crore QoQ. The restructured book reduced from 0.49% of advances in Q1FY17 to 0.44%, due to slippage of an account to NPA.  

IIB has continued to deliver a strong performance leading to continuous re-rating in multiple. Normalised return ratios of 18% RoE and 2% RoA provide comfort. We largely maintain our estimates and expect PAT to grow at 26.2% CAGR to Rs 3639 crore by FY18E. The bank is well placed to benefit from higher business momentum maintaining stable margin and lower capital usage, which will entail improvement in return ratios. Therefore, we revise our target price higher to Rs 1350 from Rs 1250 earlier assigning higher multiple of 3.5x FY18E ABV. We recommend 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.