Emkay Global Financial's report on AXIS Bank
Despite slower growth, lower NIMs and higher opex weighing on PPoP (down 11% yoy), Axis reported a PAT beat at Rs31.3bn (est: Rs27.5bn) mainly due to contained provisions. Growth disappointed again, but asset quality trends were better vs. peers. GNPA ratio was down 32bps qoq at 3.5%, while restructured pool stood at 0.64% (+31bps qoq) of loans. Credit growth remains an irritant (+10% yoy), lagging peers like ICICI (17%)/HDFCB/KMB (15%). However, Axis expects to improve the growth trajectory with the help of retail/SME businesses and a gradual pickup in large corporates. NIM too remains an irritant, but Axis pins hope on better growth/change in the product mix and declining PSL drag. We believe the bank has undergone a major transformational journey in the past few years, fortifying the balance sheet, building strong capital/provision buffers and revving up the digital banking platform and even the subsidiaries.
However, it will have to deliver on growth/core-profitability to re-rate from hereon. Factoring in slower-than-expected growth/NIMs, we trim our earnings estimates for FY22-24 by 1-3%. However, we still expect the bank's RoA/RoE to improve from a low of 0.7%/7% to 1.7% %/17% in FY24E. Retain Buy with a revised TP of Rs1020 (Rs960 earlier), valuing the core bank at 2x Dec'23E ABV and subs/investment at Rs75.
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