Numbers speak for themselves: The Bank, which clocked a mediocre profit of Rs.75 crore for FY’08, is looking to touch a figure of Rs.1000 crore for FY’13E(having already posted a net profit in excess of Rs.800 crore for FY’12E).
Key growth drivers of the loan book: The key growth drivers with regard to the loan book are vehicle finance segment, credit cards, Loan Against Property (LAP). However, the focus going forward in the consumer finance book would be LAP and credit cards.
Significant improvement in CASA ratio: The Bank has significantly improved the CASA ratio on an expanding Balance Sheet from 15.7 per cent to 27.8 per cent since March 2008 till date. The strong surge in CASA has led to a significant improvement in the Net Interest Margin (NIM) (from 1.37 per cent to 3.22 per cent) during the corresponding period.
Completion of the “full circle”: The Bank has not only added the entire range of missing products to its portfolio but has efficiently scaled up the branch network from 180 to 421 ( targeting a figure of 650 by FY’14E). This, backed by strong surge in fee income growth (more than 50 per cent of which is not linked to the Balance Sheet) has helped the Bank scale new heights!
Valuation & Recommendation
We expect IndusInd Bank to post a net profit of Rs.1055 crore on Net Interest Income of Rs.2225 crore in FY’13E. We expect the Bank to clock a net profit of Rs.1335 crore on Net Interest Income of Rs.2820 crore for FY’14E. This translates into an EPS of Rs.28.5 for FY’14E. At the present price, the share is available at 2.4x FY’14E adj. book value and a P/E multiple of 11.5 earnings. Considering the strong growth backed by robust asset quality and improved operational parameters, we assign a multiple of 3 to FY’14E adj. book value (of Rs.137.5) to arrive at a price target of Rs.413 over the next 9 months.
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