IndusInd Bank is no longer a "potential" turnaround story, according to BofA Securities. The brokerage said that the hard part is done and the results of its work will show up as soon as the next quarter.

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The brokerage has highlighted IndusInd Bank as its preferred pick within the midcap space. It has reiterated its buy rating and a price target of Rs 1,500, implying a potential upside of 50 percent.

IndusInd Bank's bar for execution is very low at current valuations, which now offer enough margin of safety, according to BofA Securities. The firm further said that IndusInd's profitability is the best in-class, despite the de-risking.

BofA also said that the capital buffers and liabilities of the private bank are much improved as compared to peers.

The bank had reported a 68.7 percent rise in net profit at Rs 1,959.2 crore for the October-December quarter of 2022-23 against Rs 1,241.4 crore in the corresponding period a year ago, beating street estimates.

BofA has listed four main triggers for a potential 50 percent upside to the bank’s stock:

1. It believes that macroeconomic factors and the interest rate cycle are now finally aligned with the IndusInd Bank’s business mix.

2. The liabilities and AQ or capital buffers of the bank are much-improved against its peers.

3. The core profitability of the bank is still the best-in-class despite de-risking.

4. BofA noted that at 1.2x price-to-book value (P/B) – which measures the market valuation relative to book value – the stock is pricing in a 13.5 percent and 14 percent growth and return on equity, respectively.

Another brokerage CLSA in January had also recommended a ‘buy’ rating on the stock with a price target of Rs 1,500 after its quarterly results.

The Reserve Bank of India last week granted a two-year extension to Sumanth Kathpalia as MD and CEO of IndusInd Bank. His current term was to end on March 23.

Its promoter Hinduja group is also seeking to hike its stake in the lender to up to 26 percent after the revision in Reserve Bank of India (RBI) guidelines on private bank ownership.

Shares of IndusInd Bank are trading 0.8 percent higher at Rs 1,021.25.

Also Read: IndusInd Bank extends losses after analysts say CEO should have received longer tenure

(Edited by : Rukmani Krishna)

First Published:Mar 28, 2023 11:46 AM IST