Purchase IndusInd Bank with a Rs. 2000 goal: MK Global Finance

 Purchase IndusInd Bank with a Rs. 2000 goal: MK Global Finance

In a research study dated December 19, 2023, Emkay Global Financial expressed its bullishness on IndusInd Bank and recommended a buy rating with a target price of Rs 2000.

The study report on IndusInd Bank by MK Global Financial

We spoke with IIB's MD and CEO, Sumant Kathpalia, about the bank's progress on Cycle 6 planning and its approach to achieving profitable and sustainable development. He cited the bank's strong retail liability franchise (it has added over 1,000 branches), a balanced credit portfolio mix that includes a larger percentage of AHL, SME, and Card, microbanking as opposed to microfinance, and, ultimately, its unrelenting emphasis on creating repeatable, sustainable returns on assets. (1.8–2.2%). The bank is open to going the inorganic path and is eager to develop a robust wealth management business, including AMCs. Sumanth is eager to continue serving for the whole term beyond March 25 as long as the bank has enough middle and senior management succession planning in place to prevent any disruptions to operations. A strong return on assets (RoA) of 1.9–2% and a return on equity (RoE) of 16–18% is what we anticipate the bank to generate over FY24–26E, which we have increased by 1-4% in light of improved growth and reduced LLPs. The bank provides robust capital buffers (CET 1 at 16.3%) and contingency provisions (0.5% of loans), and any investment by promoters to raise ownership could further improve capital levels.

Prospects

Let's go on to 25E ABV Vs. 2x September 25th ago. Taking into account the better earnings/ROE trajectory and margin sustainability despite contraction concerns among rivals, we increase TP to Rs2,000/share from Rs1,825/share, with its P/ABV at 2.1x Dec.