Emkay Global Financial's research report on AXIS Bank
Axis Bank continued to report strong core profitability (up 53% YoY), supported by robust margin expansion (+30bps QoQ/70bps YoY) and healthy core fees. This, coupled with reversal of MTM losses, led to a 9% beat on PAT at Rs58.5bn (up 62% YoY). Overall LLP was higher than expected, as the bank made prudent provision of Rs3.4bn on a specific account, showing early signs of weakness. Overall Credit growth was moderate at 15% YoY/4% QoQ vs peers’ (>20% YoY), mainly due to sluggish growth in the retail book at 17% YoY/1% QoQ, in turn dragged by mortgage and card book. However, NIM expanded 30bps QoQ to 4.3%, due to better portfolio mix, asset re-pricing and interest recognition in a restructured account. Bank expects NIM to remain structurally healthy, as the full benefit of portfolio mix and RIDF run-down is yet to reflect. As per Management, the Citi retail portfolio acquisition deal is well on track and should be consummated within the guided timeline. Bank’s internal RoE generation remains stronger than consumption (due to moderate growth), with CET 1 at 15.6%; thus, it may not need to raise capital in the near term.
We revise our earnings estimate upward for FY23/FY24/FY25 by 7%/4%/2%, and expect the bank to deliver 1.7-1.8%/17% RoA/RoE by FY25E. Given the improving coreprofitability, RoE profile and Management stability, we revise our TP multiple to 2.1x Dec24E ABV (from 1.8x) and, thus, our TP to Rs1,300/share (vs Rs1,110 earlier); retain BUY.
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