Indusind Bank: Ahead Of Q1 Result, 1145-1155 May Be A Big Technical Hurdle

Trading Idea: IIB

CMP: 1127

Sell on rise around 1145-1155

TGT: 1100*-1075-1045*-1020-980*-960 (1-3M)

TSL> 1180

Note: Consecutive closing (3 days) above 1180 for any reason, IIB may further rally up to 1195-1205*-1225 and 1265-1300-1335* & 1385-1445 in the near to long term (alternative bullish case scenario from the current trading level).

Technically, IIB has also strong resistance zone around 1135 and it may open around 1145 amid NF gap up opening today.

For IIB:

Actual Q4FY16 TTM EPS: 39.15 (Diluted)

Expected Q1FY17 EPS: 11.00

Projected Q1FY17 TTM EPS: 40.41

Projected FY17-18 EPS: 46.45-55.05

Average PE: 22 (Current TTM PE: 29.37)

Projected fair value: 890-1025-1215 (Q1FY17 TTM/FY:17-18)

IIB is a great banking story with a consistent performer around 30% average growth in EPS (FY-12 EPS was at 16.86 and FY-16 EPS stands at 39.26), which moderated to some extent around 24% for the last two years.

But, we may see some more moderation in retail banking growth in the coming quarters as a result of extreme competition from the new entrants as well as the existing players as all are changing their strategy from corporate eccentric to retail ones and basically targeting the same set of customers in retail/MSME.

Also, recent South Bank CEO statement that there is some signs of stress in the retail loan portfolio also (MSME/Agri) may be indicating that all is not so rosy with retail assets also.

But, Indusind Bank, being a relatively new entrant, has excellent loan portfolio, specially CV business and together with great emphasis on cross sells/other income amid digitization and branch/ATM expansion drive, its a great private bank story.  

But, considering the time & price action, most of the good sets  of news might be discounted to a large extent and so, unless & until technically, it gives a break out above 1180 zone, it will come down in the coming days.

As an investor, one should buy in dips around 1045-980 zone for a decent risk reward target of 1225-1335 by FY-17, if today's result published as par expectation and management future guidance is optimistic.

Analytical Charts:

Article Courtesy: Frontiza.com