Motilal Oswal has given Buy recommendation for IndusInd Bank recommended buy rating on the stock with a target price of Rs 1450 in its research repo with a target price of Rs. 1450 in its research report issued on Sep 23, 2022
Motilal Oswal’s research report on IndusInd Bank
IIB has demonstrated a healthy traction in operating performance over the past few quarters as it successfully braved the storm in late FY20 and FY21. It reported a loan growth of ~18% in 1QFY23 (vs average of 8% over FY20-22). Improving business activity and a recovery in its core CV and MFI segments will aid overall portfolio growth and further ease credit cost. We expect 18% loan CAGR over FY22-24. The management is strengthening its liability franchise, with an increased focus on garnering Retail deposits. The same has clocked 39% CAGR over FY20-22, while the mix, as per LCR disclosures, rose by ~1,000bp to 41%. Asset quality risks are receding, with a gradual reduction in stress from the MFI and CV book. The restructuring book too moderated to 2.1% of loans, which will keep slippages under control. The bank carries a healthy PCR of ~72% and a provision buffer of 1.2% of loans, which will result in a moderation in credit cost to 1.3% by FY24E. We have added IIB to our Model Portfolio, which was last published in Feb’22, and the stock has delivered ~26% returns since then. With key issues addressed, and steady progression in earnings along with improving growth momentum we expect the stock to re-rate further.
We estimate FY24 RoA/RoE of 1.9%/15.7% and maintain our Buy rating with a TP of INR1,450 (1.8x FY24E ABV).