Prabhudas Lilladher's research report on Axis Bank
Axis bank earnings were mixed as operating income missed estimates by 4% due to weaker margins although PAT was a beat at Rs41.2bn (PLe: Rs39.8bn) driven by lower provisions (due to stronger recoveries). Loan growth was a tad higher led by retail, however the management was a bit cautious on credit growth in FY23E owing to a tougher global environment. The likelihood of reaching the guided RoE of ~16% seems lower in the medium term as margin recovery could be protracted and opex may remain elevated. However, balance sheet strength and improving asset quality provide some cushion.
Valuation discount to ICICIBC might widen to 20-25% (currently 16%) unless NIM improves. With RoE of 14.2% in FY24E, we maintain multiple for AXSB at 2.3x FY24E ABV though cut TP from Rs975 to Rs940. Maintain BUY.
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