Brokerages Raise Price Targets On Axis Bank After Q2 Results

Most analysts raised price targets on Axis Bank Ltd. after second quarter, citing prudent provisioning and a strong balance sheet.

The Mumbai-based private lender returned to profitability in the quarter ended September. Its net profit stood at Rs 1,683 crore compared with a net loss of Rs 112 crore a year ago.

The lender's net interest income, or core income, rose 20% year-on-year to Rs 7,326 crore. Asset quality improved sequentially, while the bank made cumulative provisions worth Rs 4,580 crore during the quarter.

According to Amitabh Chaudhry, managing director and chief executive officer, Axis Bank now has a provisioning buffer worth Rs 10,839 crore for any possible slippage in the future.

That even prompted analysts to either remain bullish or upgrade their investment recommendations for the private lender.

Out of the 55 analysts tracking Axis Bank, 45 have a 'buy' recommendation, nine have a hold, while Goldman Sachs has a 'sell' recommendation on the stock. The average of Bloomberg consensus 12-month target price is 17.9%.

Shares of the lender fell as much as 1.8% to Rs 495.60, down for the second straight day.

Here’s what brokerages have to say...

JPMorgan

• Upgrades to 'overweight' from 'neutral'; raises price target to Rs 600 from Rs 500
• Restructuring outlook is positive
• Provisioning remains conservative
• Capital levels are high post equity raise and balance sheet looks well protected
• Asset quality picture better than feared; standard assets cover provides a large buffer
• Growth indicators are improving
• Raises operating profit estimates by 8% and 8.5% for FY22 and FY23
• Key risk: elevated slippages from BB and below book, and restructuring book

CLSA

• Maintains 'buy' rating; raises price target to Rs 700 from Rs 600
• Pre-provisioning operating profit beat and strong asset quality commentary
• Non-NPA provisions at 1.8% of loans should cover majority of expected stress
• Cuts FY21 and FY22 credit cost expectations to 450 basis points from 513 basis points
• Increases core pre-provisioning operating profit estimates by 6% for FY21-23
• Expects return on equity of 15% by FY23
• Should lead to a re-rating

Macquarie

• Maintains 'outperform' rating; hikes price target to Rs 624 from Rs 504
• Continues to make provisions; balance sheet strengthens further
• Disclosed stressed book is reasonably covered
• Potential earnings upside would be 40% if credit costs were to come down by 80 basis points to normalise around 150 basis points for FY22E
• Key question is whether collection trends are sustainable

UBS

• Maintains 'buy' rating; raises price target to Rs 700 from Rs 650
• Beat on operating lines and asset quality
• Carrying excess provisions of around 1.9% of total loans
• Prefers Axis Bank due to strong digital footprint and inexpensive valuation
• Raises EPS estimates by 9% and 4% for FY21 and FY22, respectively
• Expects RoE to bounce to 12.3% and 14.6% in FY22 and FY23, respectively

Emkay

• Upgrades to 'buy' from 'hold'; hikes price target to Rs 620 from Rs 520
• Moderate growth but margins surprise positively
• Further strengthening provisioning buffer
• Collection efficiency is expected to reach 97% by end of October
• Like aggressive stance to front-load provisions
• Key risks: Higher-than-expected NPAs and prolonged management transition

Prabhudas Lilladher

• Upgrades to 'accumulate' from 'hold'; raises price target to Rs 570 from Rs 480
• Strong core pre-provisioning operating profit growth driven by net interest income and recovery in fee income
• BB and below stress rising is a disappointment but adequate provisions should cushion
• Upgrade due to good comfort on provisions, capital and better growth