Indusind Bank Ltd - Q4FY14 Update - CMP Rs.499, Rating Changed to Accumulate, with a Target of Rs.575 - Sushil Finance

INDUSIND BANK LTD. (IIB) - Q4FY14 RESULT UPDATE

CMP Rs.499, Rating Changed to Accumulate, with a Target of Rs.575

Indusind Bank Ltd. (IIB) has reported excellent set of numbers for the quarter ended March'14 with superior growth & stable asset quality. We attended the analyst meet of the company and following are the key highlights of the results.

Key Highlights of Q4FY14 Results

- Healthy advances growth (~24% YoY) coupled with better NIMs has resulted in strong NII growth which grew by ~18% YoY & 7% QoQ to Rs.7.8 bn. Advances growth was mainly on back of robust growth in corporate loan book which grew by ~38% YoY while consumer finance grew at a moderate pace of ~11% YoY on back of flattish growth in CV segment. Corp/Retail loan book stood at 55:45.

- NIM's were better than expected at 3.75% (Q3-3.65%) on back of lower cost of funds. CASA improved marginally to 32.6% (Q3-32.2%) majorly due to rise in CA (~11% QoQ growth). Healthy NII growth, stable NIM's, strong core-fee income growth (~28% YoY) coupled with cost optimization (C/I - 44.5%) has led to robust growth in PPP which grew by ~32% YoY.

- Despite gloom economic scenario, asset quality remained stable with GNPA improving marginally to 1.12% (Q3 - 1.18%) while NNPA came in at 0.33% (Q3 - 0.31%). Credit cost stood at 13 bps & 48 bps in Q4 & FY14; much below management guidance (~55-60 bps) which we expect to remain under control going forward. Slippages during the quarter were at ~Rs.1.9 bn (1.4% on annualized basis). Restructured book stood flat QoQ at 0.33% while PCR stood at 70% (Q3 - 74%). Sale to ARC in Q4 was Rs.350 mn (R.240 mn).

- Management Guidance: 1) NIMs likely to remain stable with upward bias due to (a) Benign Cost of funds led by judicious mix (b) Asset mix turning back to 50:50. 2) C/I ratio to remain stable with medium term improvement backed by more number of new branches becoming profitable and completion of major capex towards technology. 3) CV segment (~17% of book) showing signs of bottoming out with major excess capacity being absorbed & expects major revival post elections. Also not expecting any major incremental slippages from CV segment going forward. 4) No chunky accounts in NPAs and no major accounts in restructuring pipeline. 5) Bank has showcased road map for next 3 years wherein it targets to double its business & branches (FY14 - 602), retain leadership in CV financing and continue to explore other avenues such as Rural banking, Investment banking, Corporate banking.

OUTLOOK & VALUATION

Strong advances growth, better NIMs coupled with stable asset quality has led to superior performance in the current quarter. Strong execution track record coupled with well-defined strategy over FY14-17E (advances growth CAGR ~25-30%) to auger well for the bank's growth over the next 3-4 years. Sustainable & profitable above-industry growth, stable asset quality, superior NIMs coupled with robust return ratios to result in re-rating of the stock going forward. Considering the sound fundamentals & strong growth prospects, we have upward revised our earnings estimates & hence recommend 'Accumulate' on the stock with a revised price target of Rs.575.

Shares of INDUSIND BANK LTD. was last trading in BSE at Rs.476.8 as compared to the previous close of Rs. 479. The total number of shares traded during the day was 84843 in over 3684 trades.

The stock hit an intraday high of Rs. 486.85 and intraday low of 473.25. The net turnover during the day was Rs. 40700050.

Source : Equity Bulls

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