Buy Axis Bank; target of Rs 1300: Emkay Global Financial

Buy

Emkay Global Financial's research report on Axis Bank

Axis Bank continues to report weak credit growth, which has now slipped to 9% YoY; this, along with margin contraction (of 6bps QoQ) and higher retail slippages (net at Rs29bn vs Rs22bn in 2Q) led to elevated provisions. However, operational cost too is on the decline QoQ, containing the earnings miss at 4% to Rs63bn/RoA@1.7%. Credit growth moderation was mainly driven by slowdown in the bank’s retail book (incl unsecured loans and corporate book), which is likely to stay soft amid liquidity and asset quality challenges. The mgmt believes unsecured loan stress will remain elevated near term, but seasonal stress in the agri portfolio should ease QoQ. Building in the slower credit growth and higher LLP, partly offset by moderating opex, we cut earnings by 3-9% over FY25-27E.

Outlook

The stock has seen sharp correction recently and trades at relatively lower valuations of 1.3x Dec-26E ABV for a bank still delivering healthy 1.7% RoA/14-16% RoE. Thus, we retain BUY, and cut our TP to Rs1,300 (from Rs1,400), valuing the SA bank at 1.7x Dec-26E ABV and subs at Rs110/sh.

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Axis Bank - 17012025 - emkay