Buy Axis Bank; target of Rs 1140: Prabhudas Lilladher

Prabhudas Lilladher's research report on Axis Bank

Axis Bank (AXSB) saw a mixed quarter; core PPoP at Rs90.8bn missed PLe by 1.8% due to lower NII, although core PAT beat PLe by 16% as provisions dropped sharply QoQ led by improving asset quality. NIM declined by 10bps QoQ due to back-ended growth and higher LCR. However, NIM compression in FY24E could be lower for AXSB as (1) RIDF share declined YoY from 3.5% to 2.3% and (2) share of higher yielding products has increased. Ex-Citi, loan growth was strong at 7% QoQ, mainly led by retail/SME. Deposit outflow reduced by 550bps YoY and for Q4FY23 deposit accretion was healthy at 7% QoQ, due to CASA growth of 9.9%. Bank suggested that pace of branch expansion would increase and achieving a 2% opex to assets could take longer.

Outlook

Hence, we increase opex for FY24/25 by average 4% and lower PAT by 2.3%. Rolling forward to Mar’25 ABV, we slightly tweak our multiple to 2.2x from 2.3x but raise TP to Rs1,140 from Rs1,100. Retain ‘BUY’.