Axis Bank share price: Motilal Oswal says Buy with target price of Rs 925

Motilal Oswal says that Axis Bank has delivered a strong performance and appears well-positioned to report robust earnings traction. Moreover, moderation in fresh slippages, coupled with improved underwriting and an increasing retail mix, would help maintain strong credit cost control. On the business front, retail disbursements reached an all-time high during the quarter, with strong disbursements seen in Home Loans (+45% QoQ) and LAP (+51% QoQ)

Motilal Oswal says that Axis Bank has delivered a strong performance and appears well-positioned to report robust earnings traction. Moreover, moderation in fresh slippages, coupled with improved underwriting and an increasing retail mix, would help maintain strong credit cost control. On the business front, retail disbursements reached an all-time high during the quarter, with strong disbursements seen in Home Loans (+45% QoQ) and LAP (+51% QoQ). Axis Bank delivered strong sequential growth across segments. On the asset quality front, total restructuring stood at 0.3% of loans. Motilal Oswal expects credit cost to decline to 1.5%/1.3% over FY22/FY23. Motilal Oswal increased their FY22/FY23E earnings by 12%/6% and estimated Axis Bank to deliver RoA/RoE of 1.7%/16.4% in FY23. Motilal Oswal said maintain Buy on Axis Bank with revised target price of Rs 925.

Sharekhan says that Axis Bank’s results for Q4FY2021 were strong with operational results ahead of expectations. Asset quality improved sequentially compared to proforma GNPA/NNPA and is a key positive. Net interest income (NII) grew by 11% y-o-y to Rs. 7,554 crore and was in-line with estimates. Operating profit grew by 17% y-o-y to Rs. 6,864 crore, up 12.6% q-o-q, better than estimates. The front-loading of provisions seen in Q3FY2021 helped; and the sequential decline in provisions, indicates well-placed asset quality. Therefore, PAT at Rs. 2,677 crore, up 140% q-o-q, in Q4FY2020 was a loss, but ahead of expectations.

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Net interest margin declined marginally at 3.56% (down 3 bps from 3.59% for Q3FY2021). Advances growth is improving, but is still at sub-par levelsRetail disbursements rose to all-time highs. Retail disbursements for the quarter were at new all-time highs. Axis Bank’s GNPA improved sequentially from proforma GNPAs, which is a positive. The Reported GNPA/ NNPA at 3.7%/1.05% versus pro forma GNPA/NNPA of 4.6%/1.2% for FY2021. 85% of corporate book is now rated A- and above with 94% of incremental sanctions in FY2021 being to corporates rated A- and above, explains Sharekhan.

Axis Bank’s Management commentary was positive and indicated FY2022E to be a strong year for growth and profitability. The bank has completed in FY2021 with minimal residual provisions. Axis Bank is well-capitalised with a strong CRAR (Tier1 at 15.4%), helped by lower growth in Risk Weighted Assets (RWA) and the recent fund-raising. Its digital prowess, improving business traction across segments, normalised collection efficiency, and business strengths indicate an improving outlook. Sharekhan too maintains Buy on the stock with an unchanged price target of Rs 900.

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