Riding High On Demonetisation Boost, IndusInd Bank Gets Brokerages’ Thumbs-Up

Shares of Indusind Bank rallied over 6 percent to Rs 1,231, making it the best performing Nifty stock after brokerages gave a thumbs-up to its third quarter earnings performance. The bank posted steady profitability trends while managing to remain unscathed from the government’s demonetisation move.

Analysts retained their rating on IndusInd Bank, with Credit Suisse, Jefferies and Ambit Capital raising their target prices by 4-5 percent citing strong loan growth, steady asset quality, strong jump in low-cost deposits driven by demonetisation and margins holding up in the December-ended quarter.

While the private bank saw a strong 42 percent year-on-year growth in non-vehicle retail loans, the management slightly lowered its guidance by 60 basis points for credit cost for FY17.

Jefferies

• Raises price target from Rs 980 to Rs 1,030 to factor in better loan growth and NIM.
• Retains Underperform
• Enough data points suggesting the bank has evaded any demonetisation related pain-points.
• Underperform rating has a more fundamental bias towards long-term earnings sustainability.
• Marginally raises FY17/FY18/FY19 earnings estimates by 0.4 percent/3.2 percent/3.0 percent respectively. This is driven by higher net interest income on better-than-expected growth in loans, which were partly offset by higher operating expense and provisioning.

Goldman Sachs

• Raises price target by 2.5 percent to Rs 1,164
• Net profit in line with estimate but core profits 10% ahead of expectations on higher NIMs and fee income.
• Revises FY17-19E EPS by -1 percent to +2.6 percent on third quarter FY17 trends.
• Retains Neutral rating given balanced risk-reward at current valuations off 19.4 times FY18E PE

Macquarie

Retains ‘Outperform’, price target at Rs 1,290

Prefers IndusInd for the high degree of earnings predictability, diversified loan book/fee streams and best-in-class growth trajectory.

Motilal Oswal

• Retains Buy rating, hikes price target by 2.1 percent to Rs 1,430
• Strong performance fades demonetisation worries.
• Strong core profitability, an improving CASA ratio and healthy return ratios are the key positives.