Shares of Axis Bank staged a huge recovery of around 8 percent from its low points, even as experts anticipated a weak show post its Q4 performance.
Multiple experts Moneycontrol spoke to had believed that the stock could see a lower opening. However, that does not necessarily mean it is an exit point or a point of entry either.
Also Read: Axis Bank Q4 loss at Rs 2,189 cr on three-fold jump in provisions; asset quality worsens
While there was no doubt among experts about what kind of numbers the lender had reported, their approach toward the stock is quite different from one another's. Here are four approaches one could have toward the stock.
Cheapest corporate-focused lender
Sanjiv Bhasin of IIFL highlighted how, after the correction and the likely fall ahead, Axis Bank could become the cheapest corporate bank in terms of valuation.
“Axis Bank has managed to deliver a kitchen-sink quarter performance and bring out everything (to the table). These were largely known and hidden…the way it has happened is disappointing. The stock has corrected about 10-12 percent and has been an underperformer. We will have to wait for a change of regime now,” Bhasin, who is EVP—Markets and Corporate Affairs at IIFL, told Moneycontrol.
Speaking on the outlook for the stock one year from now, Bhasin said it is likely to be in a better position. Classification of NPAs has been standardised by the Reserve Bank of India, he said, adding that the road forward looks smoother.
“On a price to book basis, it is the cheapest corporate bank as well,” he said.
Wait and watch approach
Meanwhile, investors could also adopt a wait and watch approach instead of reacting in a knee-jerk manner, believes AK Prabhakar of IDBI Capital.
“Before trying to catch a falling knife, investors should first wait for a rejig in management. The Q4 results were full of write offs. Hence, wait before you start buying even though it may open lower on Friday,” said Prabhakar, who is Head of Research at IDBI Capital.
Look outside! There’s more...
Having said that, one could also take a look at peers in the corporate-focused segment, experts said.
“…The only corporate focused private bank we hold is Yes Bank, which has proved that unarguably it is the best managed corporate focused bank in terms of its scorching pace of growth in assets and maintaining pristine asset quality in the midst of spike in soured loans among its corporate focused rivals,” Ajay Bodke, CEO and Chief Portfolio Manager (PMS), Prabhudas Lilladher, told Moneycontrol.
A word of caution
Lastly, analysts also recommend being cautious about the stock before you rush to buy it. Sanjeev Jain of Ashika Stock Broking said that while the results did disappoint, the worst may not be past.
“Wait out before you plan to buy the stock because we don't know how much pain is still left in terms of asset quality. I think investors should avoid the stock until the picture is clearer. It also reported tax write back of Rs 1,300 crore, without which the net loss would have been wider," said Jain, who is Associate Vice-President at Ashika Stock Broking.
Case File
The bank on Thursday reported a loss of Rs 2,188. 74 crore for January-March, as against a net profit of Rs 1,225 crore in the same quarter last year.
This is the first ever quarterly loss posted by Axis Bank since it listed over two decades ago.
Slippages for the quarter nearly quadrupled year-on-year to Rs 16,536 crore, with nearly Rs 13,900 crore of new slippages coming from the corporate sector. So more than 80 percent of the slippages were from companies rated 'BB' and below.
Analysts polled by Reuters had estimated a decline of 56 percent in net profit to Rs 534 crore, and 4 percent rise in net interest income to Rs 4,909 crore.
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