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MOSL: Morning India (28/July/21): 1. IndusInd Bank (Operating performance in line; asset quality deteriorates, but recovery underway); 2. Dr Reddy's Labs; 3. Indigo; 4. Torrent Pharma; 5. Dalmia Bharat; 6. Coro

MOrning India (28/July/21): 1. IndusInd Bank (Operating performance in line; asset quality deteriorates, but recovery underway); 2. Dr Reddy's Labs; 3. Indigo; 4. Torrent Pharma; 5. Dalmia Bharat; 6. Coromandel Inter.

 

Today’s top research idea

IndusInd Bank: Operating performance in line; asset quality deteriorates, but recovery underway

• IIB reported an in line earnings performance in a challenging environment. However, credit cost stood elevated in 1QFY22 on account of higher slippages in the Retail portfolio. NII growth remained muted due to moderation in loan growth. NIM declined by 7bp QoQ to 4.06% due to excess liquidity. Deposit trends continue to remain strong, led by Retail deposits.
• Loan growth moderated, while the liability franchise continues to show an improvement, driving a consistent reduction in funding cost. Asset quality witnessed pressures as collections were hampered in Apr-Mar'21, with stress dominated by Retail, particularly in the MFI/Vehicle segment. Restructured book increased to 2.7% (v/s 2% in FY21), which is higher compared to other large peers. However, collection efficiency has recovered sharply to 96% as on Jun'21.
• We expect these trends to improve further. Higher provision coverage and contingent provisioning of 1% of loans provides comfort. We expect IIB to deliver a FY23E RoA/RoE of 1.7%/14.4%. We maintain our Buy rating with an unchanged TP of INR1,200/share (1.8x FY23E ABV)

Piping hot news

IMF slashes India’s growth forecast for FY22 to 9.5% from its previous projection of 12.5%

The International Monetary Fund (IMF) has slashed India’s growth forecast for FY22 to 9.5% from its previous projection of 12.5% citing the severe second Covid-19 wave during March-May. The global growth forecast remained unchanged at 6% for the calendar 2021 as upgrades in the developed world were offset by downgrades in several countries that experienced renewed waves, notably India.