scorecardresearchIndusInd Bank: What should you do with the stock after Q3?

IndusInd Bank: What should you do with the stock after Q3?

Updated: 19 Jan 2023, 02:07 PM IST
TL;DR.
IndusInd Bank's stock slipped 2% on BSE after the company released its December quarter scorecard. Most brokerage firms have a positive view on the stock with 'buy' calls. Credit Suisse, CLSA, Morgan Stanley and Jefferies all have 'buy' calls on the stock with target prices ranging from 1,430 to 1,600. The average of 42 analysts polled by MintGenie also have a 'buy' call on the stock.
Brokerage firm Motilal Oswal Financial Services has a buy call on the stock with a target price of  <span class='webrupee'>₹</span>1,550.

Brokerage firm Motilal Oswal Financial Services has a buy call on the stock with a target price of 1,550.

Shares of IndusInd Bank slipped over 2 percent in morning trade on BSE on January 19, a day after the company released its December quarter scorecard.

As reported by PTI, the private sector lender on January 18 reported a 58 percent jump in its December quarter net profit at 1,964 crore, driven by improvements in asset quality and core income.

The bank's net interest income grew 18 percent to 4,495 crore, driven by a 19 percent loan growth and a 0.17 percent widening in the net interest margin to 4.27 percent.

The stock has witnessed a healthy gain in the last one year. It has jumped 35 percent over a year against a 10 percent gain in the banking index and one percent gain in the benchmark Sensex.

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IndusInd Bank stock in last one year.

Brokerages remain positive

Most brokerage firms have a positive view on the stock after the company's December quarter scorecard.

Brokerage firm Motilal Oswal Financial Services has a buy call on the stock with a target price of 1,550 and said the bank reported an inline performance with steady operating performance across all metrics.

Loan growth came in healthy at 19 percent YoY with traction in both corporate and consumer finance book. Within the consumer segment, growth was broad-based barring micro-finance (MFI).

"IndusInd Bank’s operating performance remains on track, led by healthy net interest income (NII) growth and controlled provisions. Asset quality remains steady, driven by lower slippages. Thus, the outlook for credit cost remains controlled," said Motilal Oswal.

"The management is guiding for continued momentum in loan growth and is looking to end FY23 with a growth of 20 percent. Healthy provisioning in the MFI portfolio and contingent provisioning buffer of 0.8 percent of loans will enable a steep decline in credit cost, thus driving recovery in earnings. We estimate PAT to report 37 percent CAGR over FY22-25, leading to an 18 percent RoE in FY24," said the brokerage firm.

Brokerage firm JM Financial also maintained a buy call on the stock and raised the target price to 1,470 from 1,390.

JM Financial expects IndusInd Bank to clock a 20 percent CAGR in loans over FY22-25E in line with management guidance.

The brokerage firm expects the impact on net interest margins (NIMs) to be minimally driven by a pick-up in high-yielding segments. It also expects IndusInd Bank's average credit costs of 150bps over FY23-25E.

"We believe IndusInd is on track to deliver RoA and RoE of 1.9 percent 16.9 percent, respectively, in FY25E. IndusInd Bank trades at undemanding valuations of 1.3 times FY25E BVPS and we expect the stock to rerate upwards aided by steady delivery on growth and return metrics. We value the bank at 1.6 times FY25E BVPS to arrive at a target price of 1,470. Clarity on the extension of CEO tenure will be a key monitorable," said JM Financial.

Among the global brokerage firms, Credit Suisse has maintained an 'outperform' call on the stock with a target price of 1,430, reported CNBC-TV18. Credit Suisse has cut FY23-25 earnings per share (EPS) estimates by 2-3 percent due to higher Opex. The brokerage firm expects the bank's RoE to improve to 16 percent, reported CNBC-TV18.

CLSA also has maintained a buy call on the stock with a target price of 1,500 and said the risk-reward is favourable, reported CNBC-TV18.

Morgan Stanley, as per CNBC-TV18, maintained an 'overweight' call with a target price of 1,525 while Jefferies maintained a 'buy' call on the stock with a target price of 1,600.

According to a MintGenie poll, an average of 42 analysts have a ‘buy’ call on the stock.

Disclaimer: The views and recommendations given in this article are those of the broking firms. These do not represent the views of MintGenie.

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First Published: 19 Jan 2023, 02:07 PM IST