Prabhudas Lilladher
IndusInd Bank (Buy)
CMP: ₹1,233.45
Target: ₹1,325
Commencing its operations in the year 1994, IndusInd Bank (IIB) derives its name and inspiration from the Indus Valley Civilisation — a culture described as one of the greatest in the ancient world combining a spirit of innovation with sound business and trade practices. IIB has grown ceaselessly and dynamically as an organisation driven by a sincere zeal to give its customers banking services and products at par with the highest quality standards in the industry.
IIB remained undeterred from the demonetisation effect and continued its robust growth in net interest income (NII) and earnings beating our expectations with PAT growth of 29 per cent y-o-y at ₹751 crore (PLe: ₹683 crore). Loan growth continued at 25 per cent y-o-y with stable margins of 4 per cent, leading to NII growth of 34.5 per cent y-o-y.
Fee income was in-line with trends, while credit cost was under control though there was slight deterioration in asset quality. CASA profile improved on back of demonetisation and as new SA account addition continued. We believe IIB will continue to deliver earnings of 27 per cent over FY17-FY19E on back of loan growth CAGR of 26 per cent, controlled credit cost and stable margins (70 per cent book fixed in nature). We have revised our earnings estimates upwards by 1-3 per cent for FY17E/FY18E and introduce FY19E earnings.