IndusInd Bank rallies 2% on upgrade from UBS

Shares of IndusInd Bank rallied 2 percent in early trade post double upgrade from UBS. At 9:40 am the stock was up 1.45 percent at Rs 1,156.

IndusInd Bank‘s net profit rose 50 percent to Rs 2,040 crore in the March quarter of FY23, the bank told exchanges in a recent filing. The net interest income (NII) of the lender came in at Rs 4,669 crore, up 17 percent from Rs 3,985 crore in the year-ago quarter.

IndusInd Bank is also likely to get added to the MSCI India Index during the rebalancing exercise in August following a sharp increase in the investment legroom for foreign portfolio investors (FPIs). The addition will be a boost for the private sector lender’s stock price as it could result in inflows of over $300 million (Rs 2,500 crore).

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Brokerage Views

UBS has upgraded IndusInd Bank to ‘buy’ from ‘neutral’. They have also raised the target price to Rs 1450 from Rs 1250 per share. The benign corporate credit cycle and peaking of interest rates are going to be favorable for the bank according to the brokerage firm. Whereas, stable corporate, CV & MFI cycles are going to support operating metrics. High pre-provision operating profits (PPoP) to assets ratio could translate to higher RoA driven by declining credit costs. The IndusInd bank stock is seen trading at 1.4x FY24 price-to-book value.

Nuvama has maintained a ‘buy’ rating on IndusInd with a target price of Rs 1,280, which translates to an upside potential of 12.1 percent. The brokerage believes that IndusInd Bank steadily is improving on most parameters. They expect this trend to sustain going forward.

Stock Performance

The IndusInd Bank stock has significantly underperformed the Nifty Bank index over the last 5 years. Nifty bank index has given a return of 63.05 percent over the past 5 years. Whereas the IndusInd Bank stock lost 39.01 percent of its value during the same period.

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