Broker's call: IndusInd Bank (Buy)

| Updated on October 11, 2019 Published on October 12, 2019


IndusInd Bank (Buy)

CMP: ₹1,223.25

Target: ₹1,650

IndusInd Bank Ltd is engaged in banking and para-banking services. The Bank is involved in accepting deposits, such as savings accounts, current accounts and fixed deposits, and banking solutions. The Bank’s segments include treasury, corporate wholesale banking, retail banking and other banking operations.

Asset quality was the dominant theme in the Q2FY20 performance of IndusInd Bank, with sequentially steep slippages (and recoveries) and a steeper addition to stress, with SMA2 increasing 3x q-o-q. The management maintained the slippages were of ‘technical’ nature (hence upgraded), while a further recovery was expected in the SMA2 accounts and identified stressed accounts (one of which overlaps with SMA2).

Overall, IndusInd Bank has added more stress in Q2FY20 with gradual recoveries over H2FY20E. The in-line core earnings were therefore a much needed consolation. As growth momentum consolidates, we expect lower tax liability to help IIB absorb incremental credit cost and sustain a healthy earnings momentum. We retain ‘BUY’ with a lower price target of ₹1,650, valuing IIB 2.8x FY21E ABV.

Published on October 12, 2019
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