ICICI Securities Upgrades IndusInd Bank with Revised Target Price of ₹1,900
ICICI Securities has issued a bullish outlook on IndusInd Bank, maintaining a Buy rating on the stock with a new target price of ₹1,900. This recommendation comes as part of their research report dated July 28, 2024.
According to the latest report, IndusInd Bank’s corporate loan growth remained steady at 3.4% quarter-over-quarter. However, the bank has shown prudence in expanding its vehicle and non-vehicle portfolios, including microfinance institutions (MFI) and unsecured loans, due to the impact of general elections and adverse weather conditions. The vehicle loan book grew by 1.6% QoQ, while the non-vehicle retail segment remained flat and MFI loans declined by 5.5% QoQ. The bank’s MFI disbursements sharply decreased, and the average loan outstanding per borrower fell by 4% QoQ as the bank focused on collections rather than expansion.
Overall, the loan growth decelerated to 15.5% year-over-year (up 1.3% QoQ), falling short of IndusInd Bank’s FY25 growth guidance of over 18%. Despite this, the bank remains confident in meeting its growth targets. ICICI Securities has adjusted its FY25 growth estimate to 17% YoY, with an expected increase to 18% for FY26.
The report highlights that IndusInd Bank’s loan-to-deposit ratio (LDR) is currently at 87%, with expectations to reach 88-90%. The revised target price of ₹1,900, down from ₹2,000, is based on a valuation of 1.85x FY26 estimated adjusted book value (ABV), compared to the previous 1.9x. Despite these revisions, ICICI Securities maintains a Buy rating on the stock.
The bank’s CET 1 capital ratio remains strong at over 16%. Key risks identified include slower-than-expected deposit growth which could limit loan expansion, and the potential short-term renewal of the current MD & CEO.
ICICI Securities’ report emphasizes that while IndusInd Bank’s growth outlook has been moderated, it continues to offer strong potential for investors.
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