Reiterate buy on IndusInd Bank – TP Rs.200
- Buy call on IndusInd Bank is maintained with a target price of Rs.200 over one year.
- The bank has reported strong performance for4QFY10 that exceed expectations in all key parameters.
- Healthy loan book growth at 30% for FY10.
- Growth in CASA deposits at 49% year on year.
- NIM expanded by 107 bps for FY10 over FY09. NIM for 4QFY10 at 3.2%
- Net non performing liability is lower at 0.5%.
- Adjusted return on equity is at 19%
- The stock is currently traded at 2.7 multiple of adjusted book value and at 16% of adjusted return for equity for FY11.
- Bajaj Hindustan is recommended to sell and the price of the stock is likely to drift downward to Rs.120 over next one year.
- It seems that a rally in sugar prices is unlikely in the near term and sugar prices in the futures market has flattened.
- The stock price is highly sensitive to sugar price movement, which is looking weak in recent times.
- Besides falling sugar prices, company’s foray into power segment and repayment liability of FCCB (Foreign Currency Convertible Bonds) may also pressure balance sheet.
- The stock is downgraded to sell with a target price of Rs.120 over one year. Downgrade is mainly due to falling sugar prices and higher financial and operational liabilities of the company.
