Edelweiss Wealth Research Suggests Buy This Large Cap Banking Stock, Sees 11% Upside

Edelweiss Wealth Research has recommended "Buy" Axis Bank in the pick of the week financial research report published on 14th October 2022. The brokerage has given a target price of Rs 888 per share to the stock of the company in its report. The given target price and the current market price indicate a possible gain of 11% for the stock in a year.

Business Overview

Axis Bank is amongst the largest private sector bank in India in terms of asset size with a balance sheet size of over INR 11 tn. It has a network of over 4,700 branches and extension counters across the country. The bank earns substantial fee income from the transaction and merchant banking activities.

Stock Outlook & Returns

On the NSE, Axis Bank's current market price of the stock stood at Rs 800.50 per share. The stock in the past 5 days surged 5.93%. It gave 19.79% positive return in the past 3 months. Over the past 1 year, the stock has fallen 0.19%. However, it gave 17.12% in the past 3 years, and 51.19% in the past 5 years.

Key highlights

According to the brokerage:

• Management is confident that the bank can continue to improve share in its focus segments like unsecured retail loans (4% QoQ in Q1FY23), credit card outstanding (14% QoQ in Q1FY23) and mid-corporates (5% QoQin Q1FY23).

• A higher share of unsecured loans and improving quality of deposits should help improve margins. Management is confident of delivering NIM of 3.7-3.8% over the next 8-10 quarters.

• With a clean loan book and focussed strategy, we expect that core earnings delivery and NIM expansion will sustain.

• We believe AXIS will re-rate depending on sustainability of its Q1FY23 performance.

According to the brokerage the key risks to the buy call are: 1) Slowdown in macro economy, 2) Deposit rates rising sooner than lending rates may hurt NIM and 3) Rise in competitive intensity.