IndusInd Bank - Result Update - BUY - Stellar Performance Continues ... Reiterate BUY - Reliance Securities

IndusInd Bank has surprised the market by reporting strong growth on both profitability as well as loan book fronts. Its net profit grew by 29.2% yoy & 6.6% qoq to Rs7.5bn led by 34.5% yoy & 8.1% qoq growth in NII and 21.2% yoy & 4.8% qoq growth in other income. About 70% of its loan book is on fixed rate, which helps the Bank it to report a strong growth on NII front amid a declining interest rate scenario. Its loan book grew by 25.1% yoy and 3.9% qoq owing to strong growth in non-vehicle retail segments (+42% yoy) and corporate loan book (+25% yoy). Despite adverse macro condition, the Bank showed greater resilience on asset quality front as gross and net NPA remained well within the management comfort zone. We expect the Bank will be one of the major beneficiaries due to currency demonetization as it has strong presence in segments where informal financing is more prevalent. We reiterate our BUY recommendation on the stock with an unrevised Target Price of Rs1,447.

Management Commentary

Management expects that the benefits of demonetization would outweigh the cost. The Bank stands to gain market share in key retail lending and business banking segments as the informal financing has been hit hard by the demonetization drive.

CASA deposit grew by 7.6% qoq owing to 22.4% qoq growth in savings bank deposits. The Bank expects major part of incremental deposit will be retained. Further, it is aggressively targeting customers for distribution of third party insurance and MF products.

Further, the Bank expects major growth in mortgage and corporate loan refinancing segment due to sharp cut in MCLRs by the big industry players. It expects part of the corporate bond portfolio to shift back to bank loan segment.

Credit cost for 9MFY17 stood at 44bps and Bank expects it to remain below the full year guidance of 60bps.

Outlook & Valuation

The Bank is well on the track to achieve the target set for Planning Cycle-III by consistently achieving its short-term and medium-term goals. As its total branch count is expected to reach 1,200 by FY17E-end, we believe that it is likely to sustain strong growth in CASA deposits and fee income as well. Stress in CV/consumer financing portfolio is expected to come-off due to improved operating environment. We reiterate our BUY recommendation on the stock with an unrevised Target Price of Rs1,447.

Shares of INDUSIND BANK LTD. was last trading in BSE at Rs.1223 as compared to the previous close of Rs. 1215.45. The total number of shares traded during the day was 120034 in over 4434 trades.

The stock hit an intraday high of Rs. 1225.9 and intraday low of 1203. The net turnover during the day was Rs. 145633403.

Source : Equity Bulls

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