IndusInd Bank Q4 Results Review: Brokerages Upbeat But Cut EPS Estimates
The improvement in the slippage ratio was driven by lower slippages in both corporate and retail segments, HSBC says.
Brokerages have cut their earnings-per-share estimates for IndusInd Bank Ltd. as the lender saw an uptick in its operating expenses in the March quarter. The lender has delivered strong asset quality numbers with a sharp reduction in slippage ratio during the period. HSBC Global Research cut its EPS estimates by 2–3.5%, while Jefferies India Pvt. trimmed its estimates by 2%.
The EPS cuts are driven by increases in operating expenses, HSBC said in a note on Friday. "We increase our estimate for cost-to-income ratio for FY25–27 to reflect further investments required in branches, digital initiatives, and hiring."
Citi expects the lender's core pre-provision-operating-profit growth to remain strong at compound annual growth rate of 20% in fiscal 2024–26, helped by steady margins and sustained strong loan growth. "Retail-deposit growth has been strong and remains key to monitor."
IndusInd Bank's consolidated net profit rose 14.9% year-on-year in the quarter ended March to Rs 2,349 crore on account of higher income from investments. In the quarter under review, income from investments rose 27% year-on-year to Rs 1,653 crore.
Brokerages have a positive outlook on the bank as it delivered a strong asset quality performance. HSBC has a 'buy' rating and has raised the target price to Rs 2,020 per share, implying an upside potential of 35% from the previous close. Jefferies is 'overweight' with a target price of Rs 1,925 apiece and Citi maintains 'buy ' with a price target of Rs 2,010 per share.
The improvement in the slippage ratio was driven by lower slippages in both corporate and retail segments, HSBC said.
Morgan Stanley On IndusInd Bank
The brokerage maintains 'overweight' stance with a target price of Rs 1,925 per share, a 29% upside from the previous close.
Asset quality improved along with strong retail deposit growth.
Profit after tax 5% below estimate due to core pre-provision operating profit miss.
Higher funding costs are offset by an increase in asset yields.
Loan growth remained strong, moderated to 18% YoY vs 20% last quarter.
Gross slippages moderated due to corporate and retail.
Expect growth in core pre-provision operating profit to remain at 20% in fiscal 2024–26.
Motilal Oswal On IndusInd Bank
The brokerage reiterates 'buy' with a target price of Rs 1,850 per share, a 24% upside from the previous close.
In line with performance, asset quality remains stable.
Management expects to maintain net interest margin in the range of 4.2–4.3%.
Bank utilised Rs 300 crore of contingent provisions, and now holds Rs 1,000 crore of contingency buffer.
Restructured book declined 8 basis points quarter-on-quarter to 0.4%.
Estimates the bank to deliver a 21% earnings compound annual growth rate over financial year 2024–26.
Leading to return on asset/return on equity of 2.1%/16.8% by fiscal 2026.
HSBC On IndusInd Bank
The brokerage maintains a 'buy' rating with a target price of Rs 2,020 per share.
The sharp reduction in slippage ratio was the key positive, other metrics were in line with estimates.
Loan growth outlook remains healthy.
The NIM should remain stable, aided by loan mix and deployment of liquidity.
Sustaining strong asset quality delivery could drive a re-rating.
Lowers EPS estimates by 2–3.5% for fiscal 2025–27.
Jefferies On IndusInd Bank
The brokerage maintains an 'overweight' rating with a target price of Rs 1,925 per share.
Asset quality improved, strong growth in retail deposits and loans.
The balance sheet is strong with a Common Equity Tier 1 ratio at 15.8%.
Gross slippages moderated due to the corporate as well as the retail segment.
Expects core pre-provision operating profit growth to remain strong at 20% CAGR in fiscal 2024–26.
IndusInd's stock rose as much as 1.53% in opening trade to Rs 1,519 apiece on the NSE. It was trading 0.17% lower at Rs 1,493.55 apiece, compared to a 0.83% advance in the benchmark Nifty 50 as of 9:25 a.m.
The share price has risen 0.83% in the last 12 months and fallen 6.3% in the year so far. The relative strength index was at 46.
Forty-four out of the 49 analysts tracking the bank have a 'buy' rating on the stock, four recommend a 'hold' and one suggests a 'sell', according to Bloomberg data. The average of 12-month analyst price targets implies a potential upside of 22%.