You are here: Home » Markets » News
Business Standard

IndusInd Bank stock soars 10% as Morgan Stanley raises target price by 14%

In its bull-case scenario, Morgan Stanley sees IndusInd Bank's stock price rising to Rs 2,030 levels in the next one-year

Topics
IndusInd Bank | Buzzing stocks | Markets

Nikita Vashisht  |  New Delhi 

IndusInd Bank
IndusInd Bank

Shares of soared 10 per cent to hit an intra-day high of Rs 1,072 apiece on the BSE on Wednesday after global brokerage Morgan Stanley raised target price on the stock by 14 per cent. The stock settled 7.6 per cent higher at Rs 1,049.5 per share as against a 0.92 per cen rally in the benchmark S&P BSE Sensex at 50,256 levels.

"We value IndusInd using a base-case price to adjusted book value valuation methodology (vs. probability-weighted price to adjusted book value valuation methodology previously). We have revised our price target from Rs 1,075 to Rs 1,225," analysts at Morgan Stanley in a report dated February 2.

In its bull-case scenario, Morgan Stanley sees IndusInd Bank's stock price rising to Rs 2,030 levels in the next one-year, while a bear-case scenario pegs the stock price at Rs 550.

On January 29, the lender had reported a 37 per cent fall in net profit to Rs 830 crore in the third quarter ended December 2020 as provisions and contingencies swelled 78 per cent YoY to Rs 1,854 crore from Rs 1,044 crore set aside last year. It had posted a net profit of Rs 1,309 crore in the quarter ended December 2019.

In a statement, the bank said pursuant to an order by the Supreme Court, no new non-performing asset (NPA) was recognised since September 1, 2020. "If such NPAs were recognised, the pro forma gross NPA would have been at 2.93 per cent and the pro forma net NPA, after considering provisions allocated, would have been 0.70 per cent," it said in a statement.

The resultant pro forma provision coverage ratio (PCR) is 77 per cent while total loan-related provisions stood at 111 per cent of pro forma GNPAs, according to investor presentation.

"Factoring more upfront asset pain recognition, while FY21E BV is revised down 2 per cent, FY22/23E is revised up 1 per cent/2 per cent. Given better-than-anticipated recovery, we revise our target multiple to 1.5x P/B (earlier 1.2x). Rolling over to June 2022E our revised target price is Rs 880 (earlier Rs 665). Valuations at 1.5x FY22E P/B capture the improvement," said analysts at Edelweiss Securities in a post-result update with a 'Hold' rating on the stock.

Those at ICICI Securities, meanwhile, have 'Add' rating on the stock with a target price of Rs 975 as the bank vindicated its focus on prudent provisioning, ramped up of a granular deposit base, reduced corporate exposure, and drove core fee income in Q3FY21.

Prabhudas Lilladher, too, upgraded the stock to 'Buy' with a target price of Rs 1,026 apiece despit the restructuring outcome being at 1.8 per cent of loans (incl. invoked), which is higher than industry, and pro-forma slippages of 1.24 per cent of loans, also slightly higher driven by unsecured retail/MFI/VF.

"Our new estimates on credit cost of 350bps is with view of bank front loading provisioning to retain higher PCR and cover hits from NPAs and should revert to much lower number ahead driving return ratios. Hence, we upgrade to BUY given the recent decline with retained TP of Rs 1,026 based on 1.5x Mar-23 ABV," the brokerage noted.

Since the result announcement, the stock price of has surged 15 per cent on the BSE, as against a 7 per cen rally in the S&P BSE Sensex.

Dear Reader,


Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Wed, February 03 2021. 13:29 IST
RECOMMENDED FOR YOU
.