Among global brokerages, BofA Securities and CLSA both have given target prices of Rs 1,400, which signals an upside potential of 20%.
“Slippages are declining, improving NPL ratios. Business momentum is accelerating in segments, wherein the bank has a strong positioning; this should lead to a stable NIM outlook, while lower credit costs can cushion against any sharp increase in cost of funds. This should keep RoEs at ~15%,” Kotak Institutional Equities said.
The domestic brokerage sees the stock’s fair value at Rs 1,350.
Analysts were surprised by the improvement in net interest margins (NIMs) by 35 bps QoQ to 4.24%.
For Anand Rathi, the key positives were strong disbursements in the MFI and VF books, strong retail deposit growth,
balance sheet with 72% coverage and a Rs 26 billion provision buffer (1.1% of loans) and strong liquidity and capitalisation.
“With credit growth picking up and moderating credit costs, earnings are expected to be strong. We maintain our positive view on the bank with a TP of Rs 1,400, valuing it at 1.6x P/ABV on its FY25e book,” it said.
YES Securities, which has a target price of Rs 1,500 on IndusInd Bank, said cyclical stablilisation augurs well for now.
“Gross slippage ratio declined from 3.6% in 1QFY23 to 2.4% in 2QFY23. The restructured book declined to 1.5% of advances from 2.1% a quarter ago. All-inclusive provision coverage remained healthy with total loan related provisions amounting to 140% of GNPA and 3% of loan book,” it said.
Securities came out with a ‘reduce’ rating on the stock, saying the bank’s asset side woes seem to have stabilised, deposit mobilisation is likely to become a challenge as large banks continue to scramble on both sides of the balance sheet.
The brokerage sees the stock dropping to Rs 1,033.
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