Accumulate Axis Bank; target of Rs 794: Arihant Capital
Arihant Capital recommended accumulate rating on Axis Bank with a target price of Rs 794 in its research report dated January 28, 2021.
February 01, 2021 / 06:10 PM IST
Arihant Capital's research report on Axis Bank
Axis Bank has reported 36% YoY decline in net profit due to higher provision and high OPEX which has impacted the earnings adversely. NII for the quarter grew by 14% YoY to Rs 7,373 cr was impacted by interest reversal during the quarter adjusted for which NII was up 19% YoY. Operating profit growth was lower at 6% YoY due to flat other income growth and higher OPEX. Cost-income ratio increased sharply due to few one-off charges along with gradual recovery in business volumes and collection cost. Provisioning buffer of the bank continues to remain high at 33% YoY/0.5% QoQ to Rs 4,604 cr. On the business front, loan book growth was lower at +6% YoY/+1% QoQ to Rs 5.82 lakh cr while deposits grew smoothly to Rs 6.54 lakh cr by +11% YoY. Despite having 18bps interest reversal impact, NIM stood flat at 3.59% QoQ.
We maintain our Accumulate rating on the stock with a revised TP of Rs 794, valuing the bank at 2.0x FY23E ABV. Considering significant provision buffers which makes balance sheet stronger, superior liability profile, lower restructuring and strong capital position (CAR at 18.7%), we continue to keep our positive stance on Axis Bank.
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