Buy IndusInd Bank with target of Rs.330 - Motilal Oswal

IndusInd Bank (IIB IN; Mkt Cap USD2b, CMP Rs224, Buy)

With the new management taking over, IndusInd Bank's branch network has increased by ~50% in the last one year to ~270 and it plans to add 100 branches every year.

NIM has improved to 3.61% (from 1.84% in 4QFY08), fee income to average assets has increased to 1.7% (from 1.1% in 4QFY08), C/I ratio has declined to 48% (from 69% in 4QFY08) and RoA has improved to ~1.5% (from 0.3% in 4QFY08).

Superior margins, focused fee income strategy and control over C/I ratio will keep core operating profitability strong. Improving liability franchise, structural improvement in RoA and 30% asset growth should help IIB to post one of the highest PAT CAGR (~30%) among the banks under our coverage. We expect RoA to remain strong at ~1.5% over FY11-13.

We initiate coverage with a Buy rating and a target price of Rs330 (3x FY13E BV of Rs110).

Source : Equity Bulls

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