Broking firm Sharekhan has suggested buying the stocks of Axis Bank in its recent research report on the bank. Apart from this the broking firm has suggested ICICI Bank, SBI and HDFC Bank in its preferred pick in its report on the Q1FY2022 Results Review.
Buy Axis Bank for a price target of Rs 940
Sharekhan has set a price target of Rs 940 on the stock of Asix Bank as the bank eyes a calibrated retail-led growth driven by low-cost deposits and a strong capital base.
"Axis Bank highlighted on its business strategy, in terms of growth and profitability. The bank wants to broaden its low-cost deposit franchise and thereby grow the deposit base in line with its loan book. Retail assets would remain a key growth driver. Moreover, it also plans to scale up and accelerate growth in the wholesale banking business. Its strategy going forward is to build a ‘digital bank' and be a leader in the digital payments space," the brokerage has said.
Axis Bank: Retail loans to drive growth
According to Sharekhan, the management indicated that it would focus on deposit-led loan growth, especially retail loans that form 54% of its total loan book. "Axis Bank's loan book clocked a 13% CAGR during FY16-FY21. In Q1FY22, it expanded its loan book cautiously by 9.5% y-o-y. Of this, retail loans grew by 14% y-o-y and corporate loans also rose at 8% y-o-y in Q1. About 88% of its loan book is secured lending. Axis Bank's emphasis continues to be on borrowers which have a relationship with the bank," the brokerage has said.
Valuations of Axis Bank
According to Sharekhan, Axis Bank trades at 2.1x/1.8x/1.6x FY2022E/FY2023E/FY2024E ABVPS and we believe valuations are reasonable and there is potential for re-rating as earnings pick up and the economic scenario normalises.
"Conservative provisioning, strong capital base, overall franchise value and a high provision coverage ratio (PCR) are positives, which will help the bank ride over medium-term challenges and support growth and valuations. We maintain a Buy rating on the stock with a revised price target of Rs. 940," the brokerage has said.
Preferred picks from the banking space: ICICI Bank, SBI and HDFC Bank
The brokerage has also highlighted other banks that are its preferred picks including, ICICI Bank, SBI and HDFC Bank, in its recent Q1FY2022 Results Review.
"Banks saw high slippages in Q1, especially in retail, agriculture or MSME due to the second wave of Covid-19. NII growth was weak and NIMs were under pressure due to sluggish disbursement and muted loan growth," the brokerage has said.
"Second wave of covid-19 also impacted asset quality of NBFCs and led to loan degrowth. Performance of home finance remained resilient as Govt.'s efforts for affordable housing bode well for the sector," the brokerage has said.
The article is informational in nature, which is taken from the brokerage report of Sharekhan. Please do consult a professional advisor vefore you invest in equities. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and authors do not accept culpability for losses and/or damages arising based on information in the article.