-------- Forwarded Message --------
Subject: Indusind Bank: Q2FY16 Is Largely In Line With Street Estimates
Date: Sun, 18 Oct 2015 21:20:07 +0530
From: Asis Ghosh <asis...@gmail.com>
Reply-To: asis...@gmail.com
Q2 PAT at Rs.560 cr, up by 30% (YOY) against median street estimates of
Rs.558 cr
Reported Q2EPS 9.40 against consensus of 10.48 & Q1EPS 9.74
Expect fireworks in IIB only above 970-995 area for 1050-1150; otherwise
it will come down.
The bank may cuts its base rate "significantly" as par RBI's new
"marginal cost of funds" methodology shortly.
*CMP: 963*
*
*
*Sell: 980-990*
*
*
*TGT: 930*-901-878-835 (1-3M)*
*
*
*TSL>1005*
Note: Consecutive closing above 1005 for any reason, IIB may target
1050-1150 (1-12M) and investors/traders may buy back the stock in that
scenario; otherwise wait for dips around 901-878 to enter the stock
again (if it sustained below 930).
*
*
*Some key takeaways & rationale:*
Q2FY16 result of IIB is largely in line with market estimates and quite
excellent supported by higher NIM and other income (distribution fees,
treasury etc).
On NPA front, the bank has also done well, but it doubled its provision
(YOY) mainly on account of its newly acquired diamond & jewellery
financing business from RBS (loan portfolio of around Rs.4100 cr).
After the recent spate of fund rising through QIP & preferential
allotment for around Rs.5081 cr, IIB has reached the desired capital
adequacy ratio to around 16.52% and the bank may not raise any further
capital for the next three years. But it appears that the above capital
infusion has somehow dented its EPS in Q2 and the bank has to support it
with sequentially higher bottom line in the coming quarters.
The bank is also going big on digital banking and exploring various
opportunities to tie-up with a payment bank, including taking an equity
stake as this may improve its CASA ratio and online banking convenience.
Recently the bank has also ties up with TATA AIA Life Insurance to
distribute its insurance policy as previous agreement with Aviva ended.
It seems that Aviva fund performance was not so impressive either and
being one of the most trusted & respected group, "TATA" brand may help
its other income to grow sequentially higher in the days ahead.
IIB is also doing well in in CV segment, specially trucks amid lower
cost of fuels and improved demand scenario. Going ahead we may see
sequentially higher volume in CV-Taxi segment in the age of OLAS & UBERS
(Cabs).
The bank is also expanding its branches very fast. It opened 43 branches
during the last quarter and aimed to have 1000 pan-India branches by
FY-16 from its present 685 branches. Considering the likely competition
from new banking entrants (full & partial), all private banks may take
this path of expansion of retail reach and we should not fire only DCB
for this !!
IIB also emphasizing more on high margin retail lending and planning to
make it up to 50% from present level 0f 41% by FY:16.
IIB may be also looking to foray into direct stock broking business in
the future either by organic or inorganic way.
IIB off late are taking some risks by extending more corporate loans,
given the overall tepid economic recovery and average earnings are
sluggish, but higher fees income from this segment are helping its other
income a lot.
Overall, around 25% of IIB's loan book is comprised of some risky loans
such as loan against property (LAP), unsecured loan, exposoure to
microfinance, construction, commercial reality, real estate etc. Any
slow down in real estate may affect its NPA.
But having said that, almost all the banks carries such risks more or
less and due to "Smart City Theme" , "Housing For All" thrust by our
Govt, and expected 7-th pay commission induced liquidity, we may not see
significant slowdown in our reality market in the coming days.
Going ahead, Bandhan bank (new full banking entrant) may pose major
competition in retail sectors, SME & micro finances in the banking
industry and as par reports, Bandhan is on a poaching drive for key
branch personnel in various levels of other Banks to grab their retail
business shares, specially in rural & semi urban areas of NE India.
IIB may shortly announce for a suitable/significant cut in its lending
base rate/PLR ("Festival Dhamaka") followed by RBI repo rate cut last
month as it shifts to marginal cost of funds as suggested by the central
bank.
Presently, base rate of IIB is 10.85%, which is significantly higher
than its peers and it follows some hybrid model of calculation for its
base rate (average cost of funds + marginal cost of funds) and take MSF
window of RBI for its short term funding need.
No doubt, IIB is a bright spot in private banking space. But time &
price is the ultimate for any stock. Going by the price action, the
scrip may be already discounted by the market to a great extent. IIB
rallied more than 200% for the last two years against broader market
rally of around 60% for the same period. It also rallied quite nicely
along with the market from its mid June low level of 785.
Going forward, IIB may not outperform the broader market (Nifty/Bank
Nifty), unless there is a fresh trigger in it (like unexpected
CRR/SLR/MSF cut by RBI to boost Festival Loan demands for another
"Diwali Gift" to the nation !!) or an exceptional "well above estimate"
Q3FY16 result.
As 970-995 zone is historically a strong technical supply zone for IIB,
selling pressure may emerge in it at some rallies as risk reward ratio
is quite favorable.
Also, current PE of IIB is around 28, which is significantly higher than
its peers. Although it a consistent "30% (YOY) performer" in nearly all
its revenue top line, some moderation in its high PE may happen.
"Significant" base rate reduction amid RBI's new method of marginal cost
may be one of the laggards for IIB scrip in the days ahead and on dips,
878-835 zone may be a good buying zone for investment purpose as par the
current market scenario.
*As par BG metrics and current market parameters:*
*Present median valuation of IIB may be around: 890 (FY:15)*
*
*
*Projected fair valuations might be around: 970-1110-1265 (FY:16-18) *
SCRIP EPS(TTM) BV(Act) P/E(AVG) Low High Median
200-DEMA 10-DEMA
INDUSINDBK 36.64 173.96 24 866.46 913.14 889.80 853.74 948.22
INDUSINDBK 43.5 745.5 24 944.09 994.96 969.52 853.74 948.22
INDUSINDBK 56.95 825.75 24 1080.23 1138.43 1109.33
853.74 948.22
INDUSINDBK 74.05 915.45 24 1231.77 1298.14 1264.96
853.74 948.22
*
*
*Analytical Charts:*
<http://2.bp.blogspot.com/-mLQWQs_z9gM/ViOJvXY-iBI/AAAAAAAAEdM/M3Y8lJ2IE7Y/s1600/IIB-16-10-2015.png>
<http://1.bp.blogspot.com/-Es6NxQY7TVA/ViOJzeymRCI/AAAAAAAAEdU/Lz39K2Kp9S8/s1600/IIB-FIBB-16-10-2015.png>
<http://4.bp.blogspot.com/-Egd_IXmPQEU/ViOJ1Ob6vnI/AAAAAAAAEdc/NDjXbclHhvE/s1600/IIB-WK-16-10-2015.png>
<http://4.bp.blogspot.com/-C5lu9pTibPM/ViOJ3eCY38I/AAAAAAAAEdk/WKvuPbLR1RA/s1600/IIB-PATTERN-16-10-2015.png>
<http://4.bp.blogspot.com/-iEthv2HL2wk/ViOJ5XZmAYI/AAAAAAAAEds/UGuZosmu3g0/s1600/IIB-TL-RSI-16-10-2015.png>
<http://4.bp.blogspot.com/-95kHPiX-Czo/ViOKAS86-HI/AAAAAAAAEd0/soQZUZhSEd8/s1600/IIB-PATTERN-MT-16-10-2015.png>
--
Thanks & Regards,
Asis Ghosh
(asisghosh.blogspot.com)
NCFM-TA Certified
--
Kindly email stock reports at
STOCKRESEARCHER@googlegroups.com
For sharing knowledge
-- NIFTYVIEWS.COM NOW A FREE OPEN SOURCE WEBSITE.
http://www.niftyviews.com/
Disclaimer :-
"The opinions expressed by the members on this board are based on
their individual experience and perceptions and to share information
with other members with the best of intentions to help fellow members
in investment decisions as equity investment is a risky venture.The administrator of
www.Niftyviews.com just provide a platform for the authors to express their opinion
and take no guarantee for the genuineness of the same."ANY member of this forum
doesnt prepare or publish any research report; or ii. provide research report; or
iii. make 'buy/sell/hold' recommendation; or iv. give price target;
---
You received this message because you are subscribed to the Google Groups "Niftyviews.com" group.
To unsubscribe from this group and stop receiving emails from it, send an email
to stockresearcher+unsubscr...@googlegroups.com.
For more options, visit https://groups.google.com/d/optout.