INDUSIND BANK
Reco price: Rs 124
Current market price: Rs 133.85
Target price: Rs 165
Upside: 23.3%
Brokerage: Anand Rathi Financial Services
The bank had robust growth in net profits, driven by higher net interest income growth (131.3 per cent y-o-y), healthy non-interest income growth of (48.8 per cent y-o-y) and reduced cost-income (by 1,102 bps to 54.4 per cent). The brokerage raises the IndusInd Bank’s (IIB) EPS estimates by 25.9 per cent in 2009-10 and 22.1 per cent, the year after the impressive Q2 results. 
Advances and deposits grew 25.2 per cent and 17.1 per cent y-o-y, respectively. NIM improved 118 bps y-o-y to 2.9 per cent, largely led by cost of deposits falling 69 bps y-o-y. CASA continues to improve, by 332 bps y-o-y and 100 bps q-o-q. Due to better-than-expected margins, NII is increased by 13.9 per cent in 2009-10 and 15.3 per cent in 2010-11. Led by steady business growth, fee income has risen by 44 per cent y-o-y, and is now around 2 per cent of average earning assets (annualised), higher than the last eight quarters’ average of around 1.3 per cent. Expect the contribution from fees to help RoEs improve to 16.4 per cent in 2009-10 and 17.6 per cent in 2010-11. At Rs 165, the stock trades at 2.7 times 2010-11 estimated earnings and 2.5 times its estimated 2011-12 adjusted book value. Maintain buy.
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