Buy This Banking Stock For Target Price Of Rs 930: Motilal Oswal

Axis Bank, one of the leading private sector bank in India with a market cap of INR 2394.8 has been given a buy rating by the Motilal Oswal for target price of INR 930. The CMP of of the stock is INR 742.60 as on 29 April 2022, 13.58 IST.

Why Should You buy?

According to the Motilal Oswal, "AXSB delivered a mixed quarter, with net profit up 54% YoY (in line), supported by lower provisions, even as margin declined and OPEX stood elevated. Loan growth stood healthy, led by continued momentum in SME and Retail segments. Growth in OPEX stood elevated at 23% YoY and 4% QoQ, resulting in a modest 9% YoY growth in core PPOP. Fresh slippages fell to INR 39.8b (v/s INR 41.5b in 3QFY22), while higher recoveries and upgrades at IN37.6b and write-offs of INR16.9b enabled a 35bp/18bp QoQ decline in the GNPA/NNPA ratio. We expect Axis Bank to deliver an FY24 RoA/RoE of 1.6%/15.7%."

Asset quality Robust: Margin Decline By 4bp QoQ

PAT grew 54% YoY and 14% QoQ to INR41.2b (inline) in 4QFY22, supported by lower provisions. PPOP grew 13% YoY (7% miss) and core PPOP rose 9% (similar to 3QFY22 levels). NII/PPOP/PAT grew 13%/7%/98% in FY22 to INR331.3b/INR247.4b/INR130.2b. NIM declined by 4bp QoQ to 3.49%, resulting in a NII growth of 17% YoY and 2% QoQ (5% miss). Other income grew 19% YoY (in line), supported by treasury gains of INR2.3b v/s INR220m in 4QFY22. Fee income grew 11% YoY, within which Retail fee grew 14% YoY.  OPEX grew 23% YoY due to a rise in business volumes (38%), investment in future growth and technology (24%), collections/COVID/ statutory-related (11%), and general increase (27%). As a result, C/I ratio stood elevated at 50.4%. The cost-to-asset ratio will rise in the short term and therefore the bank is moving away from its 2% exit guidance.

Buy for a target price of INR 930

Motilal Oswal Says, "AXSB delivered a mixed performance with net earnings picking up sharply, supported by lower provisions, even as margin declined and OPEX stood elevated. Asset quality continues to improve, aided by a decline in slippages and higher recoveries and upgrades. Restructured book moderated further, while a higher provisioning buffer provides comfort. We expect slippages to remain in control, enabling a sustained improvement in credit costs, though improvement in margin and cost ratios would be key to watch for. We expect AXSB to deliver a FY24 RoA/RoE of 1.6%/15.7%. We maintain our Buy rating with a TP of INR930/share (1.7x FY24E ABV+ INR111 from its subsidiaries).

Disclaimer

The stock has been picked from the brokerage report of Motilal Oswal. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.