IndusInd Bank top index loser despite robust Q2 profit; brokerages expect up to 25% upside

The private lender’s net profit rose 10.6 percent quarter-on-quarter from Rs 1,631 crore in Q1FY23. Operating profit has gone up 10 percent YoY and 3 percent QoQ to Rs 3,554 crore.

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Shares of IndusInd Bank declined over 3 percent in the early trade on October 20, a day after the bank announced its Q2 earnings.

IndusInd Bank posted a 57 percent year-on-year rise in net profit this September quarter. Its net profit stood at Rs 1,805.3 crore in Q2FY23 against Rs 1,146.7 crore in Q2FY22. The private lender’s net profit rose 10.6 percent quarter-on-quarter (QoQ) from Rs 1,631 crore in Q1FY23. Operating profit has gone up 10 percent year-on-year (YoY) and 3 percent sequentially to Rs 3,554 crore.

Provisions fell 33 percent YoY to Rs 1,141 crore in Q2FY23 from Rs 1,706.9 crore in Q2FY22, and it fell 8.7 percent QoQ from Rs 1,250.9 crore in Q1FY23.

Its gross NPA as a percentage of its total loan book fell to 2.11 percent in Q2FY23 from 2.77 percent in Q2FY22, and from 2.35 percent in Q1FY23. The value of Gross NPA was Rs 5,567 crore in Q2FY23, which was a 10.8 percent YoY fall from Rs 6,245 crore in Q2FY22 and a 6.1 percent QoQ fall from Rs 5,932.9 crore.

The lender’s loans went up 18 percent YoY and 5 percent QoQ to Rs 2,60,129 crore in Q2FY23. Deposits rose 15 percent YoY and 4 percent QoQ to Rs 3,15, 532 crore in Q2FY23.

The bank’s CASA has increased 15 percent YoY and 2 percent QoQ to Rs 1,33,525 crore, while the term deposits jumped 14 percent YoY and 6 percent QoQ to Rs 1,82,007 crore.

Also read: IndusInd Bank targeting credit growth of 18-20% in FY23, MD says

At 09:22 hrs IndusInd Bank was quoting at Rs 1,174.30, down Rs 44.05, or 3.62 percent on the BSE. It has touched an intraday high of Rs 1,217 and an intraday low of Rs 1,150.45.

Here what brokerages have to say after the bank’s Q3 results:

Macquarie

The global research firm has maintained its outperform call on the stock with target at Rs 1,400 per share, an upside of over 19 percent from current market price. “RoA expansion continues to impress us while strengthening asset quality is confidence inspiring. Reduction in slippage ratio to 2.5 percent from 3.7 percent a key highlight. Credit growth outlook positive amidst rising interest rate environment,” it said, according to a CNBC-TV18 report.

Credit Suisse

The stock also has an outperform call on the stock and has raised target to Rs 1,400 from Rs 1,280 per share. “RoE normalisation firmly on track. We raise loan growth expectation on strong H1 performance and lift FY23/24/25 EPS estimates by 1 percent/ 2 percent/ 2percent. We expect FY23 RoE at more than 16 percent on improved operating performance and moderation of credit cost,” it said.

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JP Morgan

The global research firm has also retained overweight rating on IndusInd Bank and has raised target to Rs 1,400 from Rs 1,250 per share. The brokerage firm is of the view that NIM expansion is relatively lower against other banks. “Q2 gives confidence on the Bank coming back to normalised RoE of 15-16 percent by FY24/25 while valuations remain undemanding,” it added.

Morgan Stanley

The research firm has an overweight call on the share price andh has also raised target to Rs 1,475 per share, an upside of over 25 percent from current market price. The brokerage firm is of the view that Q2 profit was 1 percent above its estimate, helped by core PPoP beat. “Margin improved QoQ despite higher rates. Management guided to growth acceleration and better loan mix, asset quality. We raise estimates while valuations are attractive at current level.

Motilal Oswal

IndusInd Bank reported a PAT of Rs 18.1 billion (+57 percent YoY; in line) with steady operating performance across all key metrics during the quarter. Loan growth remained steady at 18 percent YoY with traction in corporate as well as consumer finance book. Sequential growth of 6.4 percent in corporate was driven by working capital loans. Within consumer, growth was broad based barring micro-finance (MFI). However, growth in MFI book should also pick up as disruption due to regulatory changes has been fully addressed.

Fresh slippages moderated significantly to Rs 15.7 billion (2.6 percent annualized) led by corporate and consumer segments. GNPA/NNPA ratio improved by 24bp/ 6bp QoQ to 2.11 percent/ 0.61 percent, respectively. Restructured book declined to 1.5 percent in Q2 FY23 against 2.1% in 1QFY23.

We estimate PAT to report 40 percent CAGR over FY22-24, leading to 16 percent RoE in FY24E. We maintain buy with a target of Rs 1,450 (premised on 1.8x FY24E ABV).

CLSA

CLSA has downgraded the stock to outperform with target at Rs 1,400 per share. It is of the view that close to fair multiples and liability improvement will be the key. NIM was largely stable and will improve materially while asset quality improvement continues. Credit costs over the next 12-18 months is not a concern, the brokerage firm said.

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