Amidst the Russo-Ukraine war, the share price of Axis Bank has been going through a sell-off for the past one month. In the past one month, the share price of this private lender has fallen by almost 10 per cent. However, the stock is coming back from its recent lows and HDFC Securities expects the stock to rise by around 20 per cent in the next two quarters. In a detailed fundamental report, the brokerage found that after the recent correction, Axis Bank shares offer a good opportunity to re-enter the stock.
Highlighting the valuation of the share price of Axis Bank; HDFC Securities said, “Axis Bank has reported strong earnings recovery in Q3FY22. The bank’s ability to improve margins and stability in the loan book is important to focus on. More recovery than slippage in the next two-three years Expansion of its high-yield retail portfolio will be a top priority for Axis Bank.”
“We have envisaged a CAGR of 17 per cent in Net Interest Income and a CAGR of 47 per cent in Net Profit in FY21-FY24E. Further, we have estimated that the loan book will grow at a CAGR of 16 per cent over the period. We expect That the asset quality and NIM will improve gradually in FY21-24E. We expect many gaps between Axis Bank and other key peers such as ICICI Bank and HDFC Bank to gradually ease in the near to medium term, said the brokerage.
Highlighting other fundamentals of Axis Bank, the brokerage report said, “Axis Bank is the third largest private sector bank in India. Balance sheet flexibility is visible through strong capital adequacy. Legacy NPA issues 0.91 per cent But with net NPAs, slippage remains muted. Bank’s back-book clean-up has been largely completed. Loan book has been de-risked and retail segment’s contribution has increased; Incremental lending is being given only to better rated corporates. Some structural changes may improve margins in the long run. Banks focus on technological investments and digital initiatives to prepare themselves for the next phase of growth in retail and SME sectors We feel that Axis Bank is now beginning the next leg of its journey around sustained credit growth, rebalancing of portfolio for high-yield loans, reflecting better pricing power – over 1.5 per cent Key Monitorables to Advance the ROA Reflection and Again Retin G.”
On its suggestion to the positional investors in respect of the shares of Axis Bank; HDFC Securities said, ‘We think investors can buy Axis Bank midway’ from 710 Add more on dips of 715 more 640 bands. We expect a reasonable price for the base case Fair Value of 776 and Bull Case 843 per share level in the next 2 quarters.”
Disclaimer: The views and recommendations given above are those of individual analysts or broking companies and not of Mint.
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