Shares of IndusInd Bank rose nearly 4% in early trade to hit its fresh 52-week high on Wednesday, in sync with the broader market, after the private sector lender reported strong earnings in the June quarter of the current fiscal. Analysts seem to be bullish on the lender’s growth prospects and expect the share price to rise up to 22% going ahead.

IndusInd Bank shares opened 3.7% higher at ₹1,442 against the previous closing price of ₹1,390.30 on the BSE. In the first hour of trade so far, the banking heavyweight gained as much as 3.8% to touch a new 52-week high of ₹1,443.35, while the market capitalisation climbed to ₹1.09 lakh crore. On the volume front, there was a surge in buying activities as 1.64 lakh shares changed hands over the counter compared to two-week average of 1.05 lakh stocks.

IndusInd Bank released its first quarter earnings report in a post market hours on Tuesday, which showed that its net profit grew by 32% year-on-year (YoY), driven by strong net interest income (NII) and dip in provisions. The asset qualities improved for all businesses except vehicle finance, due to seasonality.

For Q1 FY24, the net profit stood at ₹2,124 crore as compared to ₹1,631 crore during the corresponding quarter of the previous year. The Hinduja group bank's NII grew 18% YoY to ₹4,867 crore, while the net interest margin stood at 4.29% in Q1 FY24 against 4.21% for Q1 FY 23 and 4.28% for Q4 of FY23.

On the asset quality front, the bank's loan book quality remains "stable", with gross NPAs improving to 1.94% of gross advances in Q1 FY24 as against 1.98% in the year-ago period. Net NPAs stood at 0.58% versus 0.59% as on March 31, 2023. Provisions and contingencies for the quarter dipped 21% to ₹991 crore vs ₹1,251 crore in the year-ago period. The bank's total loan-related provisions accounted for ₹7,239 crore, which is around 2.4% of its entire loan book.

Here’s what analysts say about IndusInd Bank’s Q1 results:

Prabhudas Lilladher says that it was a good quarter for the IndusInd Bank with core PAT beating estimates by 5.2%, driven by better NII, fees, and asset quality. “Bank has maintained its growth guidance of 18-23% which in our opinion would be a function of superior growth in MFI, vehicle, and small business. We expect a loan CAGR of 18.5% over FY23-25E.” The agency has retained ‘Buy’ rating with a target price of ₹1,530, an upside potential of 10% from current market price.

ICICI Securities has also maintained ‘Buy’ rating with a price target of ₹1,700 from ₹1,550 estimated earlier, an upside potential of 22% from Monday’s closing price. The agency says that IndusInd Bank is uniquely placed as growth (18-19% YoY for FY24-25E) has tailwinds from revival in key domains (vehicle and MFI) which due to strong yields should also enable stable net interest margin (NIM). “With sharp reduction in RSA (down to 66 bps) and macro tailwinds, we see healthy moderation in credit costs, driving RoA higher. Overall, we estimate the bank delivering 1.85%-1.9% RoA for FY24-25E with 15-16% RoE.”

Foreign brokerages Goldman Sachs and Nuvama have recommended 'Buy' ratings on IndusInd Bank with price targets of ₹1,681 and ₹1,620, respectively, saying that the Q1 earnings were in line with the estimates. Another foreign brokerage JP Morgan has given a 'Neutral' stance on the lender with a price target of ₹1,250, saying that the NIMs were flat QoQ. 

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