0 INDOSTAR share price target reports by brokerages below. See what is analyst's view on INDOSTAR share price forecast, rating, estimates, valuation and prediction behind the target. You may use these research report forecasts for long-term to medium term for your investment or trades in 2020.
INDOSTAR is at the beginning of its ‘second innings’ – the ongoing business diversification into retail lending will help drive growth, improve credit rating and enable it to enjoy higher leverage. While RoE is likely to be subdued at 10-11% in the near term, it is likely to improve to 13- 15% over the medium term. With capital adequacy ratio of 20%+, it is well capitalized and will not require any further dilution over the medium term. The key risk to our thesis lies in continued liquidity tightness leading to lower- than-expected growth in the vehicle finance segment. We maintain our estimates. Buy with TP of INR525 (1.2x FY21 BVPS).
However, the near-term RoE is likely to be modest at 9-11% due to (a) heavy investment in branch expansion (150 branches opened in the past one year) and (b) low leverage (Tier-I capital of 30%). Over the medium term, its RoE is expected to improve to 13-15% as INDOSTAR’s branches mature, and its long-term sustainable RoE is likely to be 16%. We believe that at the stock’s current valuations of 1.1x FY20E BV and 10x FY20E EPS, the risk-reward for INDOSTAR is favorable. We, thus, initiate coverage on the stock with a Buy rating and a TP of INR525 (1.2x FY21E BV).
Opportunistic and tactile lending by an astute mgt translated into (1) superior yields (~15% over FY13- 18), (2) astounding asset quality (G/NNPAs: 90/60bps), (3) efficient operations and (4) thus lofty RoAAs (4.7%, FY 13-18). Granular growth will de-risk the overall book, hereon. Further, the ability to increase leverage will drive RoAEs. At a little over ~1x trailing ABV, valuations are attractive even if we assume significant slippages (unlikely). Initiate coverage with a BUY (TP of Rs 549, 1.5xMar-21E ABV of Rs 366).
SOURCE: Data from D'Market via Quandl. Intraday data delayed 15 minutes.
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