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Despite higher opex YoY, IndusInd Bank Ltd. reported strong Q1 FY24 profit after tax at Rs 21.24 billion (up ~32% YoY) driven by strong net interest income (up 18% YoY) and ~21% YoY dip in provisions.
As detailed in our recent sector note, IndusInd Bank is our preferred pick and the thesis remains intact. We believe IndusInd Bank is uniquely placed as growth (18-19% YoY for FY24-25E) has tailwinds from revival in key domains (vehicle and micro finance) which due to strong yields should also enable stable net interest margin.
With sharp reduction in RSA (down to 66 basis points) and macro tailwinds, we see healthy moderation in credit costs, driving return on asset higher.
Overall, we estimate the bank delivering 1.85%-1.9% RoA for FY24-25E with 15-16% return on equity.
We increase our target price to Rs 1,700 (versus Rs 1,550), valuing the stock at ~1.9 times (versus ~1.7 times) FY25E adjusted book value. Maintain ‘Buy’.
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