Buy Axis Bank; target of Rs 1322: LKP Research

LKP Research's research report on Axis Bank

Axis Bank has reported strong results with several positive takeaways: 1) Accomplishing the aspiration of ROE of more than 18% for 4QFY24, 2) Healthy credit growth (14.2% YoY, 3.5% QoQ). 3) Strong other income growth (38.2% YoY, 21.8% QoQ) driven by treasury gains. 4) Lower C/I ratio of 46.9% compared to 49.5% in 3QFY24. 5) Increased disbursement in retail and SME loans. 6) Strong contingent provision buffer (1.3% of gross loans). 6) Sequential improvement in NPA (GNPA/NNPA ratio 1.43%/0.31%) driven by lower slippages. 7) Restructuring (14bps of GCA) squeezed further and at manageable levels with 20% coverage. Additionally, CDR ratio improved to 90.3% compared to 92.8% in the previous quarter. However, the negative aspect is the higher-than-expected provision expenses (₹11.8bn vs ₹10.3bn in 3QFY24). Furthermore, we believe the negatives are well provided for and anticipate growth to continue going forward.

Outlook

We value the standalone bank with PBV of 2.2xFY26E Adj. BVPS of ₹575 and reach price target to ₹1,322. We recommend BUY rating with potential upside of 17% from current level.