Q3FY21 Result Update - IndusInd Bank - ICICI Direct

IndusInd Bank posted a decent set of Q3FY21 numbers with a sequential improvement in some parameters. Rise in proforma NPA and restructuring came in-line with expectations. Provision buffer at ~3% of advances provides comfort limiting volatility in earnings. In Q3FY21, NII increased 10.8% YoY, 3.9% QoQ to Rs. 3406 crore. Margins for the quarter declined a tad by 4 bps QoQ. Other income increased QoQ by 9.8% to Rs. 1705 crore. This was mainly on account of 31% QoQ rise in core fee income. Operating expenses were under control. As a result, the cost-to-income ratio was down ~171 bps YoY to 41.8% but was up sequentially by ~41 bps, attributable to a rise in business activity. Provisions remained elevated at Rs. 1854 crore but was down 5.6% QoQ. During the quarter, the bank made provisions worth Rs. 1106 crore for Covid related stress. Overall, led by a sequential decline in provisions and pick-up in topline, the bank posted a profit of Rs. 853 crore, up 31.8% QoQ, ahead of our estimates.

Valuation & Outlook

The management is geared to pedal growth ahead with focus on certain segments. Thus, we expect business momentum to pick from here on with operational parameters expected to show improvement. We believe asset quality behaviours needs more assessment in the next quarter. However, improving collection efficiency and ample provision buffer is expected to arrest volatility in earnings. Therefore, we maintain our target price at Rs. 1050, valuing the stock at ~1.8x FY23E ABV. Given the recent price correction, we upgrade the rating from HOLD to BUY.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_IndusInd_Q3FY21.pdf

Shares of INDUSIND BANK LTD. was last trading in BSE at Rs.846.25 as compared to the previous close of Rs. 802.6. The total number of shares traded during the day was 640391 in over 16920 trades.

The stock hit an intraday high of Rs. 860.5 and intraday low of 816.7. The net turnover during the day was Rs. 538725800.

Source : Equity Bulls

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