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UBS Investment Research
AXIS Bank
B etter fee and asset quality; margins fell
Event: Earnings beat however quality ordinary
Axis Bank reported Q4 earnings of Rs 10.2 bn (33% Y/Y) ahead of UBSe of Rs
9.1 bn. However Net interest income fell sequentially due to decline in net interest
margins. Asset quality and fee income growth fared better than expected.
Impact: Raising earnings on higher fee, higher loans and lower LLP
While the 37bps q/q decline in margins to 3.44% was sharper than expected, a 36%
loan growth and 39% fee growth (adj) were better than expectation. Further
slowdown in NPL accretion in Q4 (95bps) was also positive. We raise earnings
forecast by 3.6/4.5% in FY12E/13E respectively, as we factor above mentioned
trends.
Action: Raise price target to Rs1,700, maintain Buy
We expect 22% EPS CAGR and 20% ROE over FY12-13, which makes stock
attractive at 2.7x FY12E book and 14x earnings. We expect margins to stabilise at
current levels of 3.4% and low NPL accretion would be key catalyst to the stock in
our view. We raise PT to Rs1700 and maintain Buy
Valuation: Buy, price target Rs1,700
We value the stock using residual income method at Rs1,700, which implies 3.1x
FY12E book and 14x earnings.
AXIS Bank
AXIS Bank is the fastest growing and the third largest private sector bank in
India. Specified Undertaking of the Unit Trust of India is a major shareholder.
AXIS Bank secured a banking licence in 1994, one the first few private sector
banks to do so. The bank has 908 branches/extension counters and 3,866 ATMs,
the third largest ATM network in India.
Statement of Risk
We believe a sustained economic slowdown could impact the banking and
finance sector on several fronts: lead to a slowdown in credit, increase NPL risk,
impact fee income, and exert pressure on NIM.
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
AXIS Bank
B etter fee and asset quality; margins fell
Event: Earnings beat however quality ordinary
Axis Bank reported Q4 earnings of Rs 10.2 bn (33% Y/Y) ahead of UBSe of Rs
9.1 bn. However Net interest income fell sequentially due to decline in net interest
margins. Asset quality and fee income growth fared better than expected.
Impact: Raising earnings on higher fee, higher loans and lower LLP
While the 37bps q/q decline in margins to 3.44% was sharper than expected, a 36%
loan growth and 39% fee growth (adj) were better than expectation. Further
slowdown in NPL accretion in Q4 (95bps) was also positive. We raise earnings
forecast by 3.6/4.5% in FY12E/13E respectively, as we factor above mentioned
trends.
Action: Raise price target to Rs1,700, maintain Buy
We expect 22% EPS CAGR and 20% ROE over FY12-13, which makes stock
attractive at 2.7x FY12E book and 14x earnings. We expect margins to stabilise at
current levels of 3.4% and low NPL accretion would be key catalyst to the stock in
our view. We raise PT to Rs1700 and maintain Buy
Valuation: Buy, price target Rs1,700
We value the stock using residual income method at Rs1,700, which implies 3.1x
FY12E book and 14x earnings.
AXIS Bank
AXIS Bank is the fastest growing and the third largest private sector bank in
India. Specified Undertaking of the Unit Trust of India is a major shareholder.
AXIS Bank secured a banking licence in 1994, one the first few private sector
banks to do so. The bank has 908 branches/extension counters and 3,866 ATMs,
the third largest ATM network in India.
Statement of Risk
We believe a sustained economic slowdown could impact the banking and
finance sector on several fronts: lead to a slowdown in credit, increase NPL risk,
impact fee income, and exert pressure on NIM.
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