Buy Axis Bank; target of Rs 1350: ICICI Securities

ICICI Securities is bullish on Axis Bank recommended buy rating on the stock with a target price of Rs 1350 in its research report dated October 18, 2024.

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October 18, 2024 / 15:10 IST

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ICICI Securities research report on Axis Bank

Despite 9% YoY growth in NII, Axis Bank (Axis) reported Q2FY25 PAT of INR 69.2bn, up 18% YoY, driven by strong treasury gains (INR 11.1bn) and contained opex. The bank utilised favourable tax provisions w-back (INR 5.4bn) towards prudential provisions (INR 5.2bn). Core NIM was flattish QoQ at 3.99% as cost of deposits was flat. Gross retail slippages remained elevated at ~2.7% annualised, though overall net NPA ratio (at 34 bps) was unchanged QoQ and net credit cost improved QoQ to 54bps. We increase our credit cost estimate to ~70bps each for FY25/26E, given the rising stress in unsecured retail loans. Business growth was muted at ~2% QoQ and advances growth (up 11.4% YoY) is now below systemic growth. We expect strong business seasonality for Axis in H2 and build in ~5/4% QoQ growth for next two quarters in deposits / advances. However, given the weak H1 and elevated LDR (92%), we cut loan growth estimate to ~13% YoY for FY25E. CET 1 stands reasonable at 14.12%.

Outlook

We estimate Axis to deliver RoA of ~1.65%/1.6% and RoE of ~16/15% for FY25/26E, respectively. Risk rewards appear favourable with stock trading at ~1.6x FY26E core banking and <11x FY26E EPS. Maintain BUY with revised TP of INR 1,350 (vs INR 1,430 earlier), valuing the stock at ~1.9x (~2.0x) FY26E core banking business and INR 126 per share of subsidiaries.

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