Axis Bank shares gain after strong Q2 results; should you buy?
Private lender Axis Bank reported a net profit of ₹5,863 crore in Q2FY24, registering a 10% YoY growth, while net interest income (NII) rose 18.9% to ₹12,314.56 crore. Net interest margin (NIM) during the quarter increased by 1 basis point sequentially and 15 basis points YoY to 4.11%.
Read here: Axis Bank Q2 Results: Net profit rises 10% on year to ₹5,863.6 crore, NII up 18.9%
Here’s what brokerages have to say Axis Bank Q2 results and Axis Bank shares:
Axis Bank delivered a mixed bag of performance in Q2FY24, with healthy earnings driven by steady margins and sharper liquidity deployment during the quarter. Credit growth picked up pace; however, deposit growth was muted for the second quarter in a row, resulting in a higher C/D ratio of 94%, Motilal Oswal Financial Services said.
The brokerage remains watchful of deposit accretion for the bank as it will be critical to sustain healthy loan growth. Asset quality remains robust, with slippages declining further and recoveries remaining strong.
It changed its earnings estimates by 1.7% and 2.1% for FY24 and FY25 and expects FY25 RoA and RoE of 1.9% and 16.6%. It retained a ‘Buy’ rating on the stock with a target price of ₹1,150 per share.
Also Read: Tech Mahindra falls 5% on weak Q2 earnings: Should you still buy?
Nuvama Institutional Equities
According to Nuvama Institutional Equities, Axis Bank earnings were strong, except for deposits, which grew slower at 1% QoQ, pulled down by CASA. Volatile earnings and an impending equity issue have led to the stock’s discount to peers.
Given its valuation, better-than-sector core PPOP and bottoming out of NIM earlier than peers, the brokerage house retains ‘Buy’ rating on the stock and revised FY24 and FY25 EPS estimates by 14% and -3%. It has a target price of ₹1,130 per share for Axis Bank.
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Kotak Institutional Equities
Kotak Institutional Equities maintained a ‘Buy’ call rating with an unchanged target price of ₹1,100 per share, valuing the bank at ~2X book and ~13X March 2025E EPS for RoEs of ~16%.
“Earnings estimates are largely unchanged. Citi’s integration has turned out to be less worrying, especially integration of human resources. The financial costs that are pending to be recognized are less worrying as well. FY2025 should see the bank stepping up to its peers on strengthening its franchise. We don’t see a meaningful outperformance of Axis Bank coming through over the next few quarters. We are building our investment thesis that the bank is likely to deliver a consistent loan growth and offer comfort that it has a strong liability franchise too. That, to us, should help in maintaining our current positive view,” said the brokerage.
Antique Stock Broking
Axis Bank performance was healthy and operating leverage benefits should help core profitability and return ratios, as per Antique Stock Broking. It expects the bank to deliver RoA and RoE (without factoring in capital dilution) of 1.7% and 1.8% and 18% over FY24 and FY26E.
With RoA being closer to near its historic peak, asset quality and merger challenges behind, it believes valuations are reasonable and maintains ‘Buy’ call, and raises target price to ₹1,225 per share from ₹1,100 earlier.
Read PNB Q2 Results Live Updates here
Phillip Capital
The NII performance was above expectation driven by stability in NIM in rising interest rate scenarios. The NIM stability was the outcome of loan mix change, reduction in RIDF bond and utilization of excess liquidity, said Phillip Capital.
Retail term deposit growth was comforting. Opex continues to weigh on the operating performance. As the bank focuses on granularization of deposits, contain rising opex and manage NIM, the loan growth can be moderate in near term. Hence, improvement in risk adjusted return and granularization of balance sheet would be key for multiple expansion from here-on, it added.
The brokerage has a Buy rating on the stock with a target price of ₹1,190 per share.
At 9:40 am, Axis Bank shares were trading 0.73% higher at ₹962.30 apiece on the BSE.
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Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
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Updated: 26 Oct 2023, 09:41 AM IST
