Axis Bank Q2 Results Review: Analysts Cut Target Price On Slower Growth

After Axis Bank reported a mixed bag of earnings for the quarter ended September, most brokerages have downgraded their target price on the private lender's shares. The pessimism on the stock stems from analysts expecting the bank to post slower growth and elevated credit costs.

Citi Research has cut its target price on the stock by over 2% to Rs 1,290 as it is factoring in lower growth. But it has maintained its 'neutral' view.

Axis Bank's total advances rose 11% on-year to Rs 9.99 lakh crore and deposits grew 14% on year to Rs 10.87 lakh crore.

High levels of loan-to-deposit ratio at 92% and bank’s aim to maintain it at current levels going forward will constrain credit growth. Continued re-pricing of deposits may keep margins under check, Motilal Oswal Financial Services said.

Nuvama Institutional Equities has also cut its target price on the stock to Rs 1,335 per share. However, it has maintained its 'buy' rating on the stock because of relief on asset quality concerns. Overall, the stock valuations offer downside comfort, it said.

Led by weakness in current growth trends against peers, Systematix Institutional Equities has reduced its growth estimates by 100-150 basis points for the bank, over the current and the next financial year.

"With the credit growth coming off and bank focusing on better pricing, we factor in improved margins vs our earlier estimates. This, along with factoring the tax provision reversal of Rs 550 crore in 2Q, results in EPS revision of 0%/-3%/-3% for FY25/26/27," the brokerage said.

It has lowered its target price on the scrip to Rs 1,335 per share and has maintained a 'hold' rating.

In the current environment, Axis Bank is taking necessary steps to protect its profitability and strengthen its balance sheet, HSBC Global Research said. The brokerage has lowered its earnings per share estimates and target price by to Rs 1,350, but has maintained its 'buy' rating valuing the core business of the bank.

While most brokerages have downgraded their estimates, some have maintained their earnings expectations and said that shares of Axis Bank offer favourable risk-reward premium over the medium-term

Motilal Oswal Financial Services has maintained its earnings estimates and forecasts return on assets and return of equities for the next financial year at 1.7% and 15.9%, respectively.

In January, the brokerage had slashed its target price to Rs 1,090. While current valuations look comforting after significant underperformance, the watchful stance on deposit growth, credit cost, liquidity coverage ratio and credit-deposit ratio will limit near term upside, Motilal Oswal said.

It has reiterated its 'neutral' view on the stock with a target price of Rs 1,225 per share.

Share price of Axis Bank was 5.6% higher at Rs 1,196.45 apiece, compared to a 0.08% rise in the NSE Nifty 50 as of 11:52 a.m.