What should investors do with Axis Bank post Q3 result: buy, sell or hold?

Provisions and contingencies increased considerably to Rs 4,604.28 crore in Q3FY21, rising 32.7 percent compared to the corresponding period and half a percent over the previous quarter.

January 28, 2021 / 09:35 AM IST
 
 
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Axis Bank share price fell over 2 percent in the early trade on January 28 after the private lender reported a 36.4 percent year-on-year (YoY) decline in standalone profit for the quarter ended December 2020, with elevated provisions (up 33 percent YoY). The profit for the quarter stood at Rs 1,116.6 crore against Rs 1,757 crore in the corresponding period last year.

Provisions and contingencies increased considerably to Rs 4,604.28 crore in Q3FY21, rising 32.7 percent compared to corresponding period and half a percent over previous quarter.

Also Read - Axis Bank Q3 profit plunges 36% to Rs 1,116.6 crore on elevated provisions, NII grows 14.3%

Here what is brokerages have to say about the stock and the company after the Q3 numbers:

Sharekhan

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Axis Bank is available at 2x / 1.8x FY2022E / FY2023E ABVPS and we believe valuations are reasonable and there is potential for re-rating once earnings and economic scenario normalises. A conservative provisioning policy, comfortable capitalisation, the overall franchise value and a high provision coverage ratio (PCR) are positives, which will help the bank ride over medium-term challenges and provide support to growth and valuations.

The deal with Max Financial Services and other bancassurance partnerships augurs well for fee income sustainability and growth in the long run. We maintain a "buy" rating on the stock with a revised price target of Rs 800.

Motilal Oswal

The bank has delivered a resilient performance amid a challenging macro environment and appears well-positioned to report strong earnings traction, as fresh slippages subside, while improved underwriting and an increasing retail mix help maintain strong control on credit cost.

On the business front, retail disbursements have shown strong QoQ growth and surpassed pre-COVID levels. The bank has adopted conservative accounting policies and further strengthened the balance sheet by making additional provisions. We increase our FY22/FY23E earnings by 21%/10% and estimate AXSB to deliver RoA/RoE of 1.6%/15.4% in FY23. Maintain buy, with a target price of Rs 750 (1.8x Sep’22e ABV)

Dolat Capital

We lower our slippage estimate for FY21E to 2.8 percent from 4 percent earlier, upgrading earnings by ~30 percent for FY21E/22E. With encouraging asset quality trends, declining concentration risk in wholesale book, improving core operating metrics ex of the one-offs this quarter, increased traction in retail liabilities, we upgrade our rating to buy from accumulate, with a revised target price of Rs 840, implying a multiple of 2.1x Dec-22E P/ABV.

CLSA

The research firm maintained a buy call and raised target price to Rs 1,000 from Rs 850 per share. The results were a big beat on asset quality with slippage of just Rs 6,700 crore.

The bank is the best placed to handle any potential stress. It should see credit cost normalisation in FY22 itself. The improvement in underwriting in the last four-five years should lead to a big rerating.

CLSA lift its FY22-23 earnings by 5-12 percent as it remains one of the top picks. It’s the best way to play benign credit cycle for corporate and retail loans from FY22, CNBC-TV18 reported.

Jefferies

Jefferies has maintained buy call and raised the target to Rs 840 from Rs 800 per share. The higher slippages disappoint, but outlook is better. The profit was below estimates due to higher credit cost and disappointed in higher slippages at 1.2 percent of past year loans.

The management expects slippages to fall from Q4 and normalise from FY22. The growth in core operating profit & CASA was healthy, reported CNBC-TV18.

Citi

The research house kept a buy rating with a target at Rs 800 per share. There was a higher provisioning and lower restructuring. It’s up-fronting lot of NPA recognition & provisions in FY21.

The low restructuring and high provision buffer should imply lower credit costs for FY22. The lower PAT estimated for FY21 by 14 percent adjusting for higher provisions and lower NIM, reported CNBC-TV18.

Macquarie

Research firm Macquarie has maintained outperform call on the stock with a target at Rs 780 per share. The biggest positive is strengthening of balance sheet by making provisions. The low restructured assets and 2 percent provisioning buffer give us comfort. Macquarie raises earnings estimates by 8-12 percent for FY22-23, reported CNBC-TV18.

Bernstein

The research firm has kept market-weight call on the company, with a target at Rs 530 per share. The higher provisions kept headline numbers weak. The new NPAs from moratorium bucket got tagged as NPAs and expected to trail into Q4. The bank guarded against providing upbeat guidance.

It expects FY22 to be back on course for medium-term growth and profitability guidance, reported CNBC-TV18.

JPMorgan

The research firm is overweight on the stock, with the target at Rs 710 per share. The earnings miss is on higher slippages, while given guidance for improved F22.

It has cut F21 EPS by 14 percent but keeps F22/23 largely unchanged. It assume credit cost normalisation to 1.2 percent FY22 onwards, reported CNBC-TV18.

At 0918 hours, Axis Bank was quoting at Rs 625.45, down Rs 6.65, or 1.05 percent, on the BSE.

axis

The share touched its 52-week high of Rs 760.60 on February 12, 2020 and and 52-week low of Rs 285.00 on March 25, 2020. It is trading 17.77 percent below its 52-week high and 119.46 percent above its 52-week low.
Moneycontrol News
first published: Jan 28, 2021 09:35 am

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