Nirmal Bang bullish on this private lender; sees upside of up to 40%

Brokerage firm Nirmal Bang remains optimistic about IndusInd Bank’s (IIB) business outlook. It noted that the bank is targeting annual loan growth of 16-18 per cent in the medium term.
 
With Covid risks now behind us and given the bank’s domain expertise, the CV and MFI portfolios are positioned strongly for growth as the economic recovery continues, it added.
 
With the market capitalisation of more than Rs 71,000 crore, the shares stand higher than 5 day, 20 day and 50 day moving averages but lower than 100 day and 200 day moving averages. The stock rose 2 per cent to hit an intraday high of Rs 927 on BSE.
 
"From asset quality standpoint, we expect to see better trends going forward. MFI asset quality, though improving incrementally, may see another quarter of stress before starting to normalize. The alleged ‘ever-greening’ issue (MFI segment) seems to have been addressed with external auditor’s findings being in line with the internal probe. Total provisioning buffer stands at 3.7 per cent of loans, adequate enough given the improving asset quality outlook," Nirmal Bang said.
 
"We remain positive about the bank’s growth and earnings trajectory. We are currently building in loan CAGR of 14.8 per cent over FY22-24E and EPS CAGR of 32 per cent. Our earnings growth estimates are largely driven by reduction in credit costs even as PPOP growth will be in line with overall asset growth. We maintain Buy on the stock with a target price of Rs 1,326 (1.7x FY24E ABVPS)," it added.
 
IndusInd Bank reported a 50 per cent year-on-year (YoY) jump in its consolidated net profit for October-December quarter at Rs 1,242 crore on the back of lower provisions. On a quarter-on-quarter (QoQ) basis, profit was higher by 8 per cent.
 
The provisions and contingencies declined 11 per cent YoY and 3 per cent QoQ to Rs 1,654 crore during the quarter. The bank's net interest income (NII) rose 11 per cent YoY and 4 per cent QoQ to Rs 3,793 crore, while net interest margin contracted 2 basis points (bps) YoY and expanded by 3 bps QoQ to 4.10 per cent.