Axis Bank share price fell in early trade on Tuesday a day after the company announced its June quarter earnings. The private lender reported a net profit of Rs 4,125 crore in the opening quarter of FY23, a jump of 91 per cent annually but remained flat sequentially. While the bank has beaten street estimates, its business growth momentum has come in lower than its peers.
The bank’s key financial parameters showed improvement with net interest income clocking a growth of 21 per cent year-on-year and 6 per cent sequentially, as net interest margins improved by 14 bps annually and 11 bps sequentially to 3.60 per cent during the quarter. This bank’s margins have hit a 20-quarter high
Analysts remain bullish on the stock as all key operating metrics showed improvement. “Asset quality is not showing any signs of concern. The bank is well positioned for a re-rating from current levels,” said analysts at Kotak Securities. “We base this thesis as return ratios are similar and importantly, there is less risk coming from asset quality,” they added. Analysts have pinned a fair value of Rs 960 per share on Axis Bank.
“Slippage fell from 2.3 per cent to 2.2 per cent on-quarter. Axis is the only large bank to show a quarter-on-quarter decline in slippage. GNPL declined 4 per cent QoQ. Total stress loans declined 6 per cent sequentially,” analysts at Edelweiss said. “While Q1 was a strong beat, earnings volatility has been high in the past. With a clean loan book and focussed strategy, the CEO guided that core earnings delivery and NIM expansion will sustain,” they added while reiterating their Buy call on the stock. Edelweiss has raised EPS by 12 per cent/19 per cent for FY23E/24E and target price from Rs 920 to Rs 970, revising our target multiple to 2.1x from 1.9XBV Sep-23E.
While Axis Bank has managed to moderate slippages and reduce provisions, analysts at Motilal Oswal highlighted that business growth was muted. Axis Bank’s loan book grew 14 per cent from the previous year but fell 1 per cent when compared to the January-March quarter. The corporate loan book declined 5 per cent from the same quarter last year. Motilal Oswal has maintained a ‘Buy call on the stock with a target price of Rs 875 per share.
Morgan Stanley said, “We keep an overweight rating on the Axis Bank with a target of Rs 910 per share as the profit was 13 per cent above estimate, helped by higher than expected revenue."
Jefferies said, “We maintain a buy rating on the stock and cut the target price to Rs 1,010 from Rs 1,050. The company reported better-operating results and can bridge valuation gap. The profit was ahead of estimate aided by lower credit cost and better topline, while slippages stayed low and helped keep credit cost at marginal level. The valuation gap with ICICI Bank can narrow a bit from 35-40 per cent now."
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