IndusInd Bank Logs Worst Day In Four Months Despite Upbeat Q2 Results

Brokerages' take on IndusInd Bank's Q2 results:

Morgan Stanley

• Retains 'Overweight/Attractive' and raised target to Rs 1,475 from Rs 1,400, an implied upside of 21.06%.

• Sees strong potential for revenue growth acceleration and credit cost moderation.

• Expects the stock to re-rate, aided by strong, high-margin retail franchise.

• Valuation looks attractive while earnings estimates reflect higher loan growth, improved starting point for margins, and lower credit costs in FY24/25.

• Rise in cost of funds to 4.4% from 4.1% in Q1 (4.4% YoY) has been offset by higher corporate loan yields, better mix with interest-earning assets.

• Company expects margin to remain in a tight range of 4.15%-4.25% aided by high liquidity and retirement of earlier high-cost liabilities and shift toward higher margin loans.

• Large corporate segment led the acceleration in loan growth during Q2.

• Bank expects loan growth in MFI (which was subdued in Q2) to pick up in H2FY23.

• Rise in funding costs in Q2 came as a consequence of repricing of wholesale deposits.

Motilal Oswal

• Reiterates 'buy' with a target price of Rs 1,450, an implied upside of 19%.

• PAT came in-line in Q2 with steady operating performance across all key metrics.

• RoA expansion remains on track while asset quality has improved further.

• Loan growth in Q2 remained steady at 18% YoY with traction in both corporate and consumer finance book.

• Sequential growth of 6.4% in corporate was driven by working capital loans with consumer finance segment growth was broad-based with the exception of micro-finance segment.

• Expects growth in the micro finance segment book to pick up as regulatory disruptions have been addressed completely.

• Estimates PAT to report 40% CAGR over FY22-24, leading to 16% RoE in FY24E.

• Fresh slippages moderated to Rs 1,570 core in Q2 from Rs 2,250 crore in Q1 with marginal (24bps/6bps QoQ) improvement in GNPA/NNPA to 2.11%/0.61%.

Kotak Institutional Equities

• Maintains 'add' with the target price at Rs 1,350 apiece.

• Performance of the lender is improving consistently with each passing quarter.

• Bank reported a healthy 60% YoY earnings growth, aided by 10% YoY growth in operating profit ad 33% decline in provisions.

• Slippages have declined in Q2 with NPL ratios have improved.

• Business momentum across segments has accelerated, implying a stable NIM outlook.

• Expects lower credit costs to cushion against any sharp uptick in cost of funds and is likely to keep RoEs at 15%.

• Shift in strategy to growth from balance sheet stability has aided NII growth.

• Restructured loans have come off meaningfully while the loan mix has shifted to retail from corporate sector.

• Believes that the near-term outlook for the bank looks stable to positive, except for cost of deposits.

• Sees strong momentum in vehicle finance segment while MFI business is recovering gradually.

• Expects credit costs to decline sharply over the next few quarters while flagging that cost of funds as a negative.

• Believes that RoEs for the bank are likely to be lower than in the previous cycles implying that the multiple is likely to rise gradually.

Emkay Global

• Reiterates 'buy' and raises target from Rs 1,275 to Rs 1,500 (an implied upside of 23.1%.

• Strong PAT in Q2 was aided by robust growth/margin, partly offset by higher Opex, a phenomenon seen across lenders.

• Credit growth remains healthy while RoA trajectory and clarity on managing directors term extension by three years could drive valuations.

• Factors in better growth coupled with margin improvement and benefit on growth/forex-related fees.

• Raises FY23-25E earnings by 7-9% and RoA/RoE to 1.7-1.8%/14-17%.

• Observes that the strong growth trajectory, coupled with slight margin uptick and reduction in GNPA ratio as impressive while slower traction in the CV/MFI book and slide in CASA ratio as challenges.

• Strong growth in better-yield corporate loans including NBFC, real estate, cement, metal and power segments drove credit growth.

• Believes that receding stress and healthy provision will aid overall profitability.