Buy Axis Bank; target of Rs 1582: Dolat Capital

“In Q1 FY13, Axis Bank’s NII grew by 26% YoY to Rs 21.8bn- 9% higher than our estimates of Rs 20bn. The bank reported operating profit of Rs 19.6bn compared to our estimates of Rs 16.9bn; the deviation at the operating profit level was mainly due to higher core interest income and treasury income. The bank reported bottomline growth of 22% YoY to Rs 11.5bn against our expectation of Rs 10.2bn.”

“The bank’s margin declined to 3.37% compared to 3.55% in Q4 FY12. Weakness on liability franchise and faster growth in assets impacted margin negatively on sequential basis. The bank recorded strong savings deposit growth (23% YoY) on the back of rapid branch and ATM network expansion. The bank reported robust growth on retail term deposit front though CASA deposit share drifted to 39% from 40.5% in Q1 FY12 and 41.5% in Q4 FY12. On asset quality front, GNPA rose by 33% YoY and 15.8% QoQ to Rs 21bn; gross slippage ratio declined to 1.2% from 1.31% but recovery and write-offs were also less leading to increase in GNPA on sequential basis. Net addition to GNPA was Rs 3.9bn (compared to Rs 2.0bn in Q1 FY12). Gross & Net NPAs ratio rose sequentially by 12bps and 6bps to 1.06% and 0.31% respectively. Restructured loan book increased sharply to Rs 38.3bn (2.2% of gross credit book) with incremental addition of Rs 6.28 bn in Q1 FY13.”

“We revise our earnings estimates upward by 4% for FY13 to factor in higher business growth, healthy fee income. We revise upward our target price to Rs 1,582 (from previous TP of Rs 1,577) at 2.1x ABV FY14. We reiterate our BUY rating on the stock. At current price, it quotes at 1.6x and 1.4x ABV FY13 and FY14 respectively,” says Dolat Capital research report.

Public holding more than 90% in Indian cos

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