KRChoksey is bullish on IndusInd Bank and has recommended buy rating on the stock with a target of Rs 715 in its October 14, 2014 research report.
"Indusind Bank delivered strong core operating performance with PAT of Rs 430 crs (Up 30.3% Y-o-Y & 2.2% Q-o-Q), in line with our expectation. NII grew 19.0% Y-o-Y & 4.1% Q-o-Q driven by 22.4% Y-o-Y growth in loan book and stable margins. Non interest income continued to showing superlative growth up 34% Y-o-Y driven by robust growth in fees (+31% y/y & 5% q/q) and healthy trading gains. Steady growth in trade fees, loan processing fees, forex income, investment banking fees (debt segment) coupled with rebound in financial product distribution fees have supported robust core fee income growth. Asset quality has been stable during the quarter with flat Gross NPAs and 5bps decline in credit costs sequentially. Gross and Net NPAs stood at 1.1% and 0.3% respectively with 70% coverage ratio. Provisions were lower 34% Q-o-Q on the back of lower un hedged corporate FX provision and stable asset quality. Loan book growth continued to be strong at 22% Y-o-Y & 2.2% Q-o-Q led by equitable growth in corporate loan book and retail loans. CASA ratio increased 54bps Q-o-Q led by sturdy growth in saving deposit 33% Y-o-Y (despite 100bps rate cut on SB deposits up to INR 1 lac) and uptick in CA deposits (up 2% Q-o-Q)."
"The bank continued to see strong growth in corporate loans (37% Y-o-Y) leading to 22% Y-o-Y growth in total loan book. Stable retail asset yields, decline in corporate loan yield offset by decline in cost of deposits and equitable growth in corporate & retail book were primary factors for stable margins during the quarter. Core fee income continued to grow higher than balance sheet growth resulting into sustaining higher ROA (1.9%). We drive comfort on improvement in net interest margin due to the meaningful improvement in CASA ratio, cut in saving deposit rate by 100bps and higher asset yields in the sector. Cost to income ratio has increased to 47.9% due to strong growth in other OPEX (30.8% Y-o-Y). The management's strategic focus continues on improvement in CASA ratio, higher than industry loan book growth, improvement in NIM, core fee income growth higher than BS growth and introduction of fee & yields boosters."
"Indusind Bank has been delivering consistent & superior earning growth in gradual macro recovery phase. We believe stability in asset quality, consistent high growth in core fee income and on track branch expansion are key highlights from the result. We expect Indusind Bank to deliver 26.2% CAGR in net earnings over FY14-FY17, outperforming the sector earning growth. We believe resilient universal banking business model, superior margins, strong fee income growth, loan book growth delta, improving coverage ratio and consistent delivery of planning cycle targets are key differentiators for Indusind Bank. We maintain "ACCUMULATE" rating on the stock with revised target price of Rs715, potential upside 13%," says KRChoksey research report.
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