Buy Axis Bank; target of Rs 1349: Unicon Investment

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Buy Axis Bank; target of Rs 1349: Unicon Investment

Unicon Investment is bullish on Axis Bank and has recommended buy rating on the stock with a target of Rs 1349 in its January 21, 2012 research report.

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Unicon Investment is bullish on Axis Bank and has recommended buy rating on the stock with a target of Rs 1349 in its January 21, 2012 research report.

"Axis bank (Axis) reported a good performance with PAT for Q3FY12 up by 24% to INR 10.7 bn (above our estimates of INR 9.8 bn) from INR 8.9 bn in Q3FY11. The NII for Q3FY12 increased by 23% to INR 21.1 bn. The fees earned by the bank registered a YoY growth of 26% (Q3FY12 value stood at INR 12.33 bn). The fee income came from segments including Treasury, Business Banking, Large & Mid Corporate Credit and Retail business. The total demand deposits of Axis bank grew by 32% YoY from INR 659 bn to INR 867 bn. The YoY rise in total term deposits was 36% from INR 898 bn in Q3FY11 to INR 1.21 tn in Q3FY12. This resulted in the sharp increase in cost of funds to 6.34% of total deposits as compared to the 4.79% rise in Q3FY11. Higher cost of funds reduced the NIMs to 3.75% during Q3FY12, compared to 3.81% during Q3FY11 and 3.78% during Q2FY12. Also, CASA ratio stood at 42% in Q3FY12. The bank's total net advances grew 20% YoY to INR 1.48 tn. Retail Advances grew by 32% YoY to INR 332 bn; constituted 22% of total advances, as compared to 20% at the end of Q3FY11. The advances growth was driven SME advances which grew by 21% to INR 206 bn on YoY basis."

"During the quarter, the additions to gross NPAs were INR 5.35 bn. It had upgradations and recoveries to the tune of INR 1.21 bn and write-offs including prudential write-offs of the INR 2.43 bn. In light of the current business environment, bank expects credit costs to be in the range of around 80 bps. In this quarter, it has restructured loans amounting to INR 2.95 bn, taking the total amount of restructured loans outstanding to INR 27.01 bn or 1.55% of gross customer assets. During the quarter, INR 70 mn of the restructured loan portfolio turned into non-performing assets. The net NPAs ratio marginally increased to 0.39% of in Q3FY12 from 0.29% in Q3FY11. However, the gross NPA ratio decreased to 1.10% from 1.09% in Q3FY11. The Bank had provision coverage of 75% in Q3FY12 (as a proportion of Gross NPAs including prudential write-offs). The capital adequacy ratio of the bank stood at 11.78% ahead of the regulatory requirements. The tier I capital was 8.25%."

"Axis bank (Axis) is targeting a credit growth of ~20-22% in FY13; on back of branch expansion, also the cost-income ratio is expected to gradually move downwards. Going ahead NIMs are likely to fall marginally on back of saving rate deregulation. We remain positive on the bank, owing to its attractive CASA franchise, rapid branch expansion, and multiple sources of sustainable fee income, strong growth outlook. We have Buy rating on the stock for a target price of INR 1349," says Unicon Investment research report. 

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To read the full report click on the attachment