Visit http://indiaer.blogspot.com/ for complete details AXIS Bank; Good Core Earnings; Maintain EW on Valuations
What's Changed
Price Target Rs1,150 to Rs1,485
-1% QoQ): This was marginally ahead of our estimate of
Rs7.2 bn. Headline growth was affected by lower capital
gains, but adjusted for those, core pre-provision profits
were up 9% QoQ and 36% YoY.
Loan growth was muted, but deposits growth
picked up: Axis Bank’s loan book grew by 36% YoY,
partly reflecting base effect. Sequential growth was
weaker at 2% QoQ. However, deposit growth picked up,
growing 6% QoQ– ahead of system deposits growth of
4% QoQ. We expect Axis’s loan growth to pick up in the
second half of the year to about 26% YoY by Mar-11.
NII grew 7% QoQ as margin compression was
limited to 3 bps QoQ. Rising funding costs and fading
free funds impact were countered by higher investment
yield and improved CASA (+130 bps QoQ). We expect
NIMs to normalize gradually to 3.6% by year-end, driven
by higher wholesale funding costs (but expect them to
be higher than management guidance of 3.5%).
Asset quality remained under pressure; however,
we expect gradual improvement: New slippages
remained high at 1.6% of loans and loan loss provisions
were at 1.2% of loans (both metrics were stable QoQ).
However, given macro improvement, we expect to
trends to improve towards the end of F11 and in F12.
Raise PT, but maintain EW on valuations: Axis is
trading at 15x revised F2012e earnings (up 4%) and
2.9x BV – implying that the scope for further re-rating is
low. We have take up our price target to factor in better
margin progression, and we are now assigning a 25%
weight to the bull case scenario.
No comments:
Post a Comment