INSUBCONTINENT EXCLUSIVE:
NEW DELHI: Worries over the exposure to ailing corporates have led to a round of derating in shares of IndusInd Bank in last six
months.
Analysts said the bank has material exposure to troubled housing finance and telecom companies
Also it is yet to find a Chairman
But valuation buffer still makes this stock a compelling ‘buy’, they said
After September quarter numbers released on Thursday, Credit Suisse set a price target of Rs 1,800 on the stock
Edelweiss Securities had a target of Rs 1,783, Morgan Stanley Rs 1,700, Nomura India Rs 1,575 and Macquarie Rs 1,530, suggesting up to 50
per cent upside potential
The stock traded at Rs 1,198 on Friday.
On Thursday, the bank reported 52 per cent jump in September quarter profit, thanks mainly to Bharat
But it reported a higher-than-expected slippage, which shot up by 42 per cent QoQ to Rs 1,102 crore
As a result, provisions for bad assets jumped sequentially by 71 per cent to Rs 737.70 crore
But the private lender managed to keep gross non-performing assets (NPAs) stable at 2.2 per cent.
The scrip fell 6 per cent on Thursday and
another 2 per cent on Friday.
The bank’s identified stress pool in respect of three accounts – namely ZEE, DHFL and the ADAG group –
declined 80 basis points QoQ to Rs 2,100 crore in September quarter, which was 1.1 per cent of its loan book
The bank management believes this will decline further to 0.8 per cent level in 10-15 days.
Also, management expects the bank’s exposure
to the Indiabulls group to fall from current 0.72 per cent to 0.47 per cent in Q3
Corporate loans formed 45 per cent of the bank’s loan book in September quarter compared with 61 per cent at the end of March
quarter.
"IndusInd Bank doesn’t have a chairman as of now
We believe the board may try to retain Mr Romesh Sobti as non-executive chairman and appoint retail banking head Kathpalia as CEO, as he
best suits the role,” said Macquarie, which valued the stock at 2 times FY21E P/BV.
“It is ‘cheap’ for a best-in-class ROA profile
of 2 per cent and normalised ROE of around 18-20 per cent,” the brokerage said.
“We still expect the bank to deliver 18 per cent ROEs
and following its recent de-rating
The stock trades at 1.8 times September 2021 BV of Rs 680
Our new, lower target of Rs 1,575 is based on 2.3 times September 2021 book and14 times earnings, similar to corporate banks now,” Nomura
India said in a note.
Edelweiss Securities said the bank continues to deliver reasonable and sustainable earnings growth and strengthen its
“Despite concerns on exposure to stressed groups, we believe earnings accretion from the merger (yet to crystallise), superior growth and
improved revenue traction will drive earnings,” it said and revised down its price target for the stock to Rs 1,793 from Rs 2,060.
