Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Growth moderates
During 1QFY12, Axis reported net profit of Rs9.4bn, up 27%, marginally
lower than our estimates. Moderation in loan growth to 21% was the key
highlight and pick-up in investment cycle will hold the key to uptick in
Axis’ growth. Margins continue to face pressure (down 16bps QoQ), but
we see limited downside pressure from here. Asset quality has stabilised
which should abate investor concerns, but the strong growth in fees may
be difficult to sustain. Pick-up in loan growth will be a key to earnings
growth - we expect 23% Cagr in profit over FY11-14. Maintain BUY.
Growth moderates, margins near trough
A high base effect, weakening credit demand and focus on profitability led to
moderation in loan growth from 36% in Mar-11 to 21%. Axis has been a key
lender to project finance and hence the slowdown in the investment cycle
seems to be hurting it more than its peers. Pick-up in credit growth would be
key to maintaining earnings growth in coming quarters as profits in this
quarter were boosted by corporate fee growth of 81% which in our view is
difficult to sustain. Margins have arguably bottomed at 3.3% and re-pricing of
assets should support stability/ improvement in margins.
Asset quality seems to have stabilised – positive for valuations
Fresh slippages increased QoQ, but the delinquency ratio at 1.1% of last year
loans is manageable and would abate a key investor concern. Axis has higher
exposure to some risky sectors (like gems and jewellery, shipping etc), but
the management does not see much asset quality issues and this will be key
to earnings growth for FY12. Power exposure forms 9.8% of total, but most
projects are in the construction stage and under a moratorium, hence risk of
NPL on these projects in next two years is low.
Fee growth surprised positively, but difficult to sustain
Fee growth of 53% was boosted by 81% growth in corporate fees which was
partly due to some large debt syndication deals. We don’t expect this to
continue especially as competition in the DCM business is rising. We expect
fee growth to moderate to balance sheet growth levels and hence top line
growth pick up would be critical for maintaining earnings growth momentum.
Maintain BUY
We expect earnings to grow at 23% Cagr over FY11-14 led by loan growth
and receding asset quality pressures. Moreover, profitability (FY12 ROA- 1.5%
and ROE 20%) is one of the best. Maintain BUY with target price of Rs1,625
based on 2.6x FY13 adj PB.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Growth moderates
During 1QFY12, Axis reported net profit of Rs9.4bn, up 27%, marginally
lower than our estimates. Moderation in loan growth to 21% was the key
highlight and pick-up in investment cycle will hold the key to uptick in
Axis’ growth. Margins continue to face pressure (down 16bps QoQ), but
we see limited downside pressure from here. Asset quality has stabilised
which should abate investor concerns, but the strong growth in fees may
be difficult to sustain. Pick-up in loan growth will be a key to earnings
growth - we expect 23% Cagr in profit over FY11-14. Maintain BUY.
Growth moderates, margins near trough
A high base effect, weakening credit demand and focus on profitability led to
moderation in loan growth from 36% in Mar-11 to 21%. Axis has been a key
lender to project finance and hence the slowdown in the investment cycle
seems to be hurting it more than its peers. Pick-up in credit growth would be
key to maintaining earnings growth in coming quarters as profits in this
quarter were boosted by corporate fee growth of 81% which in our view is
difficult to sustain. Margins have arguably bottomed at 3.3% and re-pricing of
assets should support stability/ improvement in margins.
Asset quality seems to have stabilised – positive for valuations
Fresh slippages increased QoQ, but the delinquency ratio at 1.1% of last year
loans is manageable and would abate a key investor concern. Axis has higher
exposure to some risky sectors (like gems and jewellery, shipping etc), but
the management does not see much asset quality issues and this will be key
to earnings growth for FY12. Power exposure forms 9.8% of total, but most
projects are in the construction stage and under a moratorium, hence risk of
NPL on these projects in next two years is low.
Fee growth surprised positively, but difficult to sustain
Fee growth of 53% was boosted by 81% growth in corporate fees which was
partly due to some large debt syndication deals. We don’t expect this to
continue especially as competition in the DCM business is rising. We expect
fee growth to moderate to balance sheet growth levels and hence top line
growth pick up would be critical for maintaining earnings growth momentum.
Maintain BUY
We expect earnings to grow at 23% Cagr over FY11-14 led by loan growth
and receding asset quality pressures. Moreover, profitability (FY12 ROA- 1.5%
and ROE 20%) is one of the best. Maintain BUY with target price of Rs1,625
based on 2.6x FY13 adj PB.
No comments:
Post a Comment