IndusInd Bank (Add) - Avendus

The FY14f PAT forecast is cut by c5% to factor the lower NIM resulting from the increase in the cost of deposits. We forecast a 12-bp y-o-y contraction in NIM during FY14f. Despite the rise in the CASA ratio, the dependence on term deposits is larger than peers; hence, there may be a larger impact on its NIM. However, despite elevated NPL provisions and softening of margins, the RoE for IIB is likely to stay in the range of 16%-20% over FY14f-FY16f. While the stock has underperformed the broader market by c20%, it has outperformed Bankex marginally in the last three months. IIB is likely to stay a relatively low-risk stock due to the strong momentum in its core revenues, resilient asset quality and sustainable improvement in the liability mix. We rollover the TP to Sep14 and raise it to INR478. The TP values the stock at the one-year forward adjusted P/B of 2.60x. We upgrade the rating from Hold to Add.

Source : Equity Bulls

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