LKP Research's research report on Axis Bank
4QFY22 marks the manifestation of sequentially lower provisioning expenses (₹9.9bn v/s ₹13bn in the previous quarter) and 14% sequential increase in net profit at ₹41bn. The bank’s reported slippages number were lower (₹39.8bn v/s 41.5bn in 3QFY22) with GNPA and NNPA ratio narrowing down to 2.82% and 0.73% respectively against the GNPA and NNPA ratio of 3.17% and 0.91% in the previous quarter. The bank’s PCR (including TWO) stood sequentially higher at 91%. Credit off-take (13.5% YoY) maintained, led by growth across segments. Furthermore, the BB & below book came down sequentially by 13bps to 0.75% of customer assets and reported lower restructured advances of ₹40bn (~52bps of gross loan book). On business front, credit growth (13.5% YoY & 6.4% QoQ) and healthy deposit growth (16.2% YoY & 6.5% QoQ) were superior against previous quarter. The future outlook of asset quality is at manageable level as the strong standard asset coverage (1.8% of gross loans) is likely to absorb delinquencies from restructuring. In view of adequate covid buffer, glimpse of growth rejuvenation and manageable restructuring pool, we recommend BUY.
We value the standalone bank at PBV of 2.3xFY23E Adj. BVPS of ₹417 to arrive at a price target of ₹960. We recommend BUY on Axis Bank.
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