Buy Axis Bank; target of Rs 1400: PLilladher

“Axis bank’s top management ressured that they expect asset quality to remain robust in FY13 with slippages/restructuring remaining inline with FY12 levels and limited risk from growing Infra book in the near term. Retail focus will help mitigate some growth pressures but fee income will moderate. We continue to believe that market is dis-regarding recent corporate asset quality performance and stable asset quality trends will surprise in the near term. Valuations at 1.6x FY13 book is undemanding; Axis/ICICI continue to remain top picks.”

“Axis re-emphasised their thrust on increasing share of retail to 30% from 22% currently. Liability customers constitute ~45-50% of incremental sourcing which we believe is a credit positive. Management is seeing significant pricing competition in mortgages but believes competitive landscape is relatively better in auto lending. Delinquency/restructuring in expected to remain in line with FY12 levels v/s consensus expectations of a pick up in slippages/credit costs. Axis does not expect any material near term pressure on Infra portfolio with very limited exposure to imported coal and gas projects. Power portfolio remains unseasoned (at currently 25% project commissioned) but management expects ~45% of their portfolio to be commissioned by FY14,” says Prabhudas Lilladher research report.  

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