ECONOMY

IndusInd Bank Q1 Results: Most Analysts Maintain ‘Buy’; Shares Gain

Brokerages bet on a recovery in IndusInd Bank Ltd.’s collection efficiency, improved retail deposit growth and a pickup in disbursements, among others, as most of them maintained their ‘buy’ stance on the private lender after the first quarter of the ongoing fiscal.

The private lender said its collection efficiency picked up in June to 96% after slipping in April and May.

IndusInd Bank saw its net profit nearly double over a year earlier in the quarter ended June on a fall in provisions and higher other income. Sequentially, too, the earnings rose. The core income of the bank also increased year-on-year.

Its asset quality, however, deteriorated over the preceding three months.

Shares of IndusInd Bank gained as much as 3.48% to Rs 1,009.80 apiece around 1 p.m. on Wednesday. Of the 49 analysts tracking the lender, 43 maintained a ‘buy’ rating, four suggested a ‘hold’ and two recommended a ‘sell’, according to Bloomberg data. The 12-month consensus price target implies an upside of 15.7%.

Here’s what brokerages have to say about IndusInd Bank’s June-quarter earnings…

Anand Rathi

  • Recommends ‘buy’ with a target price of Rs 1,120 apiece.

  • Improvement in collection efficiency, normalisation of disbursements, strong retail deposit growth, sturdy balance sheet with 72% coverage, strong liquidity and capitalisation augured well for the future growth prospects.

  • Expects credit growth to pick up from the September quarter.

  • Earnings in the upcoming quarters to be driven by lower credit cost.

Key Risks

Dolat Analysis & Research Themes

  • Recommends ‘accumulate’ with a target price of Rs 1,060.

  • Operating metrics are in line with NII growing 8% YoY.

  • Improvement in collection efficiency an encouraging sign.

  • Restructuring is significantly higher than large private peers.

Key Risks

Emkay Capital

  • Recommends ‘buy’ with a 12-month target price of Rs 1,375.

  • Despite lower margin, higher opex and elevated provisions, the bank reported an in-line PAT due to healthy fee growth.

  • The worst is over in terms of asset quality, subject to no severe third Covid wave.

  • Expects RoA/RoE to improve from 0.9%/8% to 1.7-1.9%/15-16% over FY23/24E.

  • Large corporate credit growth remains healthy.

  • Strong underlying retail credit appetite to aid growth momentum.

  • Better credit growth, slowdown in deposits at recent rate cuts and lower interest reversals to drive margins higher in the near to medium term.

  • Key Risk: Prolonged normalisation of growth/asset quality trajectory.

ICICI Securities

  • Maintains ‘buy’ with a target price of Rs 1,260.

  • Focus on prudent provisioning, ramping up of granular deposit base, risk-calibrated growth aided June-quarter earnings.

  • Uptick in collection efficiency in June implies that incremental stress will be lower.

  • Expects recoveries to pick up in the second half of this fiscal.

  • Restructuring seems contained below 3%, which is commendable.

IDBI Capital

  • Recommends ‘buy’ with a target price of Rs 1,140.

  • Deposit growth remains robust, while credit growth has improved sequentially.

  • Liability franchise concerns have largely abated which is a major positive.

  • Uptick in collection efficiency in June encouraging.

  • Continuation of business strategy under the new CEO has resulted in navigating through asset quality concerns better.

Jefferies

  • Recommends ‘buy’ with a target price of Rs 1,300.

  • Lower provision aided net profit in June quarter.

  • Retail deposit franchise is stronger than last year and will aid credit-growth.

  • Improvement in demand for vehicle business to drive retail credit demand.

  • Plenty of scope for further cut in retail-term deposit rates which will be margin-supportive.

  • Rise in slippages during the quarter along expected lines.

  • Expects a gradual recovery to near normalcy in second half of this fiscal.

Motilal Oswal

  • Maintains ‘buy’ with a target price of Rs 1,200.

  • Operating performance in line with expectations in a challenging environment, while asset quality has deteriorated.

  • Liability franchise improving gradually.

  • Healthy coverage and contingent provisioning buffer of 1% of loans comforting.

  • Deposit trends continue to remain strong driven by retail deposits.

  • Improvement in liability franchise to lead to further reduction in funding cost.

  • Recovery in collection efficiency likely to continue further.

Nirmal Bang

  • Recommends ‘buy’ with a target price of Rs 1,269.

  • June-quarter performance along expected lines.

  • Asset growth built around a granular liability base.

  • Strengthening provisioning buffers to reduce earnings volatility.

  • Strong traction in retail segment an encouraging sign.

  • Disbursements starting to gradually pick up.

  • Provisioning policies remain conservative with the bank topping up its contingent buffer.

  • Improvement in collection efficiency in June a major positive.

Prabhudas Lilladher

  • Recommends ‘buy’ with a target price of Rs 1,280.

  • Control on operational expenditure has aided core pre-provision operating profit growth.

  • Asset quality deterioration along expected lines.

  • Recovery in MFI segment and improved collection efficiency across segments augurs well for growth prospects.

  • Expects return ratios to move higher post credit cost normalisation.

  • Elevated provisions to maintain PCR and take write-offs has impacted earnings in the near term.

UBS

  • Maintains ‘neutral’ with a 12 month price target of Rs 1,100.

  • June-quarter earnings in line with subdued expectations.

  • Higher-than-expected investment gains aided net profit.

  • Higher loan growth to support FY22/23 earnings.

  • Improvement in funding profile to aid resumption of loan growth.

Key Risks

  • NPAs could rise in microfinance, telecom segments.

  • Impact of any future third wave of Covid is a major downside risk.

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