Prabhudas Lilladher's research report on Axis Bank
AXSB saw a weak quarter yet again as core PAT missed PLe by 26.6% due to asset quality related technical impact of Rs6.14bn. Adjusting for the same, core PAT missed PLe by 17% owing to lower NIM and fees. Owing to more stringent recognition criteria, gross slippages were more by Rs27.1bn (one-time impact). In our view, this may also reflect the underlying stress. As bank does not intend to further change the recognition policy, upcoming quarters of FY26 and FY27 would see lower credit costs since stress is moderating in PL/CC.
Outlook
We raise provisions for FY26 by 8bps but reduce it for FY27E by 3bps. For FY26/27E, we cut NIM by 6bps and trim fees by avg. ~2.0%; core PAT is lower by 5.1%/2.6%. Due to 7bps reduction in core RoA for FY26 to 1.4%, we tweak multiple to 1.8x from 1.9x and cut TP to Rs1,375 from Rs1,500. Retain ‘BUY’.
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