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IndusInd Bank
CASA improvement and capital issue to prevent margin contraction: In spite of
having a large fixed rate retail book (commercial vehicle loans contribute ~20% of
loan book) we do not expect any significant contraction in margins for IndusInd.
Equity placement of Rs12bn in Oct-10 and improving CASA would help offset near
term margin pressure.
High EPS growth to continue, but risks from cyclical CV business remains:
With steady margins and ~30% balance sheet growth we expect EPS growth to
remain strong at ~31% CAGR over FY11-13E. But dependence on CV loan book
remains high at ~20% and with CV sales moderating over last 2-3 mnts due to a high
base impact and marginal economic slowdown, retail loan growth could be impacted.
But given the relatively small balance sheet size v/s system we believe there are
adequate levers to maintain ~30% balance sheet growth.
Maintain Overweight: We revise earnings by 7-8% as we factor in lower margins
and higher credit costs and revise down our Mar-12 PT to Rs300/share (Sep-11 PT of
Rs350/share earlier) based on 2 stage Gordon growth model implying 2.8x FY13
book. Slowdown in CV cycle remains a near term risks on growth and asset quality
but we believe there are adequate levers to maintain growth. Key risks to our
Overweight recommendation and price target include: (1) Execution risk of a
profitable branch expansion and (2) Cyclical nature of the CV business can impact
credit growth.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
IndusInd Bank
CASA improvement and capital issue to prevent margin contraction: In spite of
having a large fixed rate retail book (commercial vehicle loans contribute ~20% of
loan book) we do not expect any significant contraction in margins for IndusInd.
Equity placement of Rs12bn in Oct-10 and improving CASA would help offset near
term margin pressure.
High EPS growth to continue, but risks from cyclical CV business remains:
With steady margins and ~30% balance sheet growth we expect EPS growth to
remain strong at ~31% CAGR over FY11-13E. But dependence on CV loan book
remains high at ~20% and with CV sales moderating over last 2-3 mnts due to a high
base impact and marginal economic slowdown, retail loan growth could be impacted.
But given the relatively small balance sheet size v/s system we believe there are
adequate levers to maintain ~30% balance sheet growth.
Maintain Overweight: We revise earnings by 7-8% as we factor in lower margins
and higher credit costs and revise down our Mar-12 PT to Rs300/share (Sep-11 PT of
Rs350/share earlier) based on 2 stage Gordon growth model implying 2.8x FY13
book. Slowdown in CV cycle remains a near term risks on growth and asset quality
but we believe there are adequate levers to maintain growth. Key risks to our
Overweight recommendation and price target include: (1) Execution risk of a
profitable branch expansion and (2) Cyclical nature of the CV business can impact
credit growth.
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