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Chola Securities
Indian Bank (Buy)
Target: ₹170
CMP: ₹140
Indian Bank features among the mid-sized banks in the public sector space. As of Q1-FY22, the bank had business of about ₹9.2 lakh crore operating through a network of 5,809 branches. Prior to amalgamation with Allahabad Bank, Indian Bank’s footprint was largely skewed towards the southern states of Tamil Nadu, Karnataka, Andhra Pradesh and Kerala. Now the combined entity has a stronger presence in Central and Eastern states of India too.
The bank’s improving collection efficiencies and less than expected restructuring have improved credit cost outlook. In addition, the anticipated recovery in corporate demand should support the credit off take in H2-FY22. The bank with its strong capital base remains well placed to benefit from expected economic revival in the coming quarters.
The bank’s performance has been good despite the current economic scenario and presents a stable outlook for the bank. We expect earnings to grow on the back of improved margins and offtake in credit demand. Assigning a P/ABV of 0.6x for FY23, we maintain our target price of ₹170 and Buy rating on the stock.
Fresh slippages arising from stressed sectors, recoveries being delayed and lower than anticipated growth in advances are key risks.
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