Should you buy, sell or hold IndusInd Bank shares post Q4?

Shares of IndusInd Bank gained over 2% intraday trade on Tuesday after the private sector lender reported robust earnings in March quarter, aided by strong loan growth and steady operating performance. The stock was the best performer in the S&P BSE Bankex index, followed by State Bank of India and Axis Bank.

Snapping two session losing streak, IndusInd Bank share price opened 1.4% higher at ₹1,118 against the previous closing price of ₹1,102.05 on the BSE. During the first two hours of trade so far, the banking heavyweight rose 2.3% to ₹1,127, while the market capitalisation climbed to ₹87,028 crore. On the volume front, there was a surge in buying activities since morning with 1.3 lakh shares changing hands over the counter on the BSE against two-week average volume of 1.06 lakh stocks.

IndusInd Bank share currently trades 11.6% lower than its 52-week high of ₹1,275.25 touched on September 20, 2022, while it is up 47.5% against its 52-week low of ₹763.75 hit on June 23, 2022. In the last one year, the stock has given a return of 19%, while it has fallen nearly 2% in the six-month period. In the calendar year 2023, the largecap share has shed over 8%, whereas it climbed nearly 11% in a month.

According to market analysts, IndusInd Bank’s fourth quarter results were in line with expectations, which received a good response from investors. IndusInd Bank Ltd. has an average target of ₹1,344.47 from 18 brokers, an upside potential of over 19% from the current market price.

For the fourth quarter ended March 31, 2023, IndusInd Bank reported consolidated net profit at ₹2,043, up 46% as compared to ₹1,401 crore during the corresponding quarter of the previous year. Net Interest Income rose 17% year-on-year to ₹4,669 crore in Q4, while net interest margin stood at 4.28% in Q4FY23. Other income for the quarter grew by 13% year-on-year to ₹2,153.6 crore.

On the asset quality front, gross non-performing asset ratio improved to 1.98% of gross advances as on March 31, 2023, as against 2.06% as on December 31, 2022. Net NPA ratio fell to 0.59% of net advances as on March 31, 2023 as compared to 0.62% as on December 31, 2022. The loan-related provisions were at ₹7,324 crore or 2.5% of loan book, as on March 31, 2023.

The board of the bank also recommends dividend of ₹14 per share (140%) for FY23 as compared to ₹8.50 per share (85%) for FY22. In the past 12 months, it has paid dividend of ₹8.50 per share, while it declared 20 dividends since August 2001. At the current share price, the dividend yield stood at 0.76%.

Analysts view on IndusInd Bank Q4 results

Post Q4 results, JM Financial maintain “BUY” rating on the stock but cut target price to ₹1,375 from ₹1,470 earlier. “IndusInd has corrected sharply given that term extension for MD & CEO has been lesser than market expectations, we believe core performance for IndusInd continues to trend in the right direction. Currently, stock is trading at attractive valuations of 1.5x FY25e BVPS (for expected RoEs of 16.7% FY25e) and hence makes for an attractive entry point. Maintain BUY with revised TP of ₹1,375,” it said in a note.

LKP Securities have also retained “BUY” rating with price target of ₹1,322, saying that core operating performance of the bank remains healthy. A higher contingent buffer is likely to safeguard the bank from credit disruption from various restructuring schemes, it said. The brokerage said that Q4 numbers were stable, but the spike in MFI GNPA (4.32% v/s 3.75%) and higher slippages are the biggest disappointment. The agency believes that the bank has made adequate provisioning against the potential stress. However, the delinquencies from vehicles segment and credit cost in next quarters will be keenly watched.

Another domestic brokerage Prabhudas Lilladher has also reaffirmed “Buy” rating with a price target of ₹1,530 from ₹1,500 earlier. “Bank laid out the PC-6 strategy as a runway to FY23-26E with targeted loan growth of 18-23% and increase in retail share to 55-60% (now 49%). Pace of retail deposit (as per LCR) accretion would be a key driver to loan growth and we are factoring a 18% loan CAGR over FY23-25E. Adding branches would be necessary for strong retail business growth, and we see cost to income at average 45.6% in FY24/25E (44.3% in FY23). Asset quality has been stable and buffer provisions are 66bps; bank would like to further build these provisions,” it said. 

Meanwhile, global brokerages CLSA, Citi, Jefferies, and Goldman Sachs have assigned “Buy” ratings with their respective target prices of ₹1,500, ₹1380, ₹1,550, and ₹1522.