What should investors do with Axis Bank post Q2 results: buy, sell or hold?

Axis Bank might have reported a net loss for the September quarter but strong operating performance and improvement in asset quality fuelled confidence among brokerage firms.

Most of the global brokerage firms which came out with recommendations maintained their rating on Axis Bank.

The most aggressive target price of Rs 900 was put out by HSBC which translates to a 30 percent upside from Tuesday’s close of Rs 712 on the BSE.

Axis Bank reported a net loss of Rs 112.08 crore on a standalone basis for the second quarter ended September due to a one-time tax impact.

The private sector bank had posted a net profit of Rs 789.61 crore in the corresponding July-September quarter of the previous fiscal.

The net loss of Rs 112 crore for the quarter was driven by a one-time tax impact of Rs 2,138 crore due to changes in the corporate tax rate, the bank said.

The Net interest income (NII) of the bank increased by 16.6 percent on a year-on-year (YoY) basis to Rs 6,101 crore while the non-interest income jumped by 45.5 percent on a YoY basis to Rs 3,895 crore.

"Axis Bank posted healthy performance for Q2FY20 wherein its operating results were strong and asset quality improved. Asset quality for the quarter improved on a sequential basis as the GNPA ratio declined by 22 bps QoQ to 5.03% while the Net NPA ratio declined by 5 BPS q-o-q to 1.99%,” Sharekhan said in a note.

The brokerage firm maintains its buy rating on the stock with a target price of Rs 882. Axis Bank currently trades at 2.3xFY21E Book value which is reasonable considering a well-diversified loan book having strengths in both the retail and corporate segments.

JP Morgan: Neutral | Raised target to Rs 790 from Rs 770 earlier

JPMorgan maintained its Neutral call on Axis Bank post September quarter results but raised its target price to Rs 790 from Rs 770 earlier.

Operating growth remains strong, but any further slippages could reduce the chances of any stock re-rating. The global investment bank changed FY20/21 EPS estimates by -10%/+5%.

CLSA: Buy | Target: Rs 900

CLSA maintained its buy rating on Axis Bank post-September quarter results with a target price of Rs 900.

The global investment bank trimmed earnings estimates on higher tax, as well as provisions. The key challenge is the elevated level of slippages. CASA growth needs to improve and support the bank’s loan growth ambitions.

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