IndusInd Bank Q4 profit zooms 50% to Rs 2,040 crore: What should be your strategy?

IndusInd Bank Q4: The Board recommended a payment of dividend at the rate of Rs 14 per share.

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Investors will watch out for the IndusInd Bank share price today after the lender’s robust Q4 earnings.

IndusInd Bank beat estimates with a 49.88 percent surge in standalone net profit at Rs 2040.51 crore for the March quarter of 2022-23 as against Rs 13,61.37 crore a year back. Brokerages had predicted a 43.3 percent on-year rise in bottomline.

Net interest income of the lender came in at Rs 4,669.46 crore, registering a rise of 17 percent year-on-year.

The bank’s board also recommended the payment of a dividend at Rs 14 per share subject to approval of shareholders at the ensuing Annual General Meeting.

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Here is what brokerages have to say about stock and the company post March quarter earnings:

Motilal Oswal

IndusInd Bank’s operating performance remains on track, led by a steady growth in net interest income and controlled provisions. Asset quality remains steady, even as slippages increased on-quarter. Overall, the outlook for credit cost remains controlled.

The management is guiding for continued momentum in loan growth with 18-23 percent improvement over FY23-26. Healthy provisioning in the MFI portfolio and contingent provisioning buffer of 0.7 percent of loans will enable a steep decline in credit cost, thus driving recovery in earnings.

Motilal Oswal estimate PAT to report a 27 percent CAGR over FY23-25, leading to a 17.6 percent RoE in FY25. It reiterates the ‘buy’ rating with an unchanged target price of Rs 1,450.

Sharekhan

IndusInd Bank reported strong earnings growth in Q4FY23 with PAT at Rs 2,041 crore (up 50 percent YoY/ 4 percent QoQ) led by a 30 percent on-year decline in provisions and 13 percent growth in operating profit.

The bank is guiding for the sustained improvement in earnings growth trajectory over the next three years.

The broking firm believes strengthening retail and granular liability franchise would be most important factor. At CMP, the stock trades at 1.3x/ 1.2x its FY2024/ 25 BV. It retains the ‘buy’ tag with an unchanged price target of Rs 1,400.

CLSA

CLSA has given a buy rating with a target price of Rs 1,500 per share. The bank’s Q4 results were largely in line with expectations on core pre-provision operating profit (PPoP) and profit after tax (PAT).

The reported net interest margin (NIM) was flat quarter-over-quarter, but with the retail yield inching up, margin pressure may be manageable.

Additionally, CLSA notes that growth could remain robust with a cyclical recovery in the commercial vehicle (CV) book and a robust expected considering high growth in the unsecured book.

CLSA conservatively factor in a compounded annual growth rate (CAGR) of 16% in FY24-26 and believes that the bank’s 1.2x FY25 book is undemanding.

Morgan Stanley

Research house has kept overweight rating on the stock with a target price of Rs 1,525 per share. The bank’s core pre-provision operating profit (PPoP) rose 20% year-over-year, helped by a stable margin despite higher rates.

Credit costs moderated quarter-over-quarter to 146 basis points. However, elevated gross slippages were a slight negative.

The retail deposits per liquidity coverage ratio (LCR) rose 4% quarter-over-quarter and 19% year-over-year. However, negatives were further moderation in the savings account (SA) ratio.

Jefferies

Broking house kept a Buy rating with a target price of Rs 1,550 per share. The Q4 profit was tad ahead of estimates, with a 20% rise in operating profit and a 30% fall in credit costs.

Jefferies sees scope for healthy growth in net interest income (NII) due to an increase in loans and the potential for wider net interest margins (NIMs).

Additionally, Jefferies believes that the bank’s slippages will taper off as stressed loans are well-provided for and see a 21% compounded annual growth rate (CAGR) in profit over FY23-26, a return on equity (RoE) of 16% in FY25, and an improved funding mix.

InCred

Brokerage house has maintained ‘Add’ rating with a target price of Rs 1,300 per share. The bank has posted an in-line Q4 profit after tax (PAT) amid flat margins and a fall in credit costs.

The bank may face margin pressure and an increase in operating expenses in the near term.

According to broking house the 51% of the bank’s fixed-rate book, recent hikes in yields, and the microfinance institution (MFI) book may support yields.
The cost of funds to surge amid rise in the cost of deposits.

InCred believes that the bank is better placed on the asset mix front but vulnerable on the deposit and operating expense fronts.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.