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Deep franchise value
CHANGE
Initiate coverage with BUY rating and TP INR1,353
Axis Bank has one of the best deposit franchises and has added significant
branches in the last couple of years the benefits of which we expect to
accrue. We expect healthy earnings CAGR of 23% over FY11-13E with
average ROEs & ROAAs of 20.4% and 1.56% over the same period. It is one
of our top picks in the sector.
CATALYST
Decline in wholesale deposit costs and stable asset quality
We expect steady to declining wholesale deposit costs due to slowing
credit demand will benefit Axis Bank’s margins; lending rate hikes also to
cushion margins. Infrastructure and SME exposure remain a key risk to
asset quality but we expect SME’s to hold up better than last cycle and
infrastructure is a sector specific risk rather than a bank specific risk.
VALUATION
Valuations remain extremely attractive, for a proven franchise
It currently trades at 1.6x FY13E ABV (with ROEs of 20.1% over FY11-13E),
which is below its long-term average multiple of 2.45x. Downside risks to
our TP and estimates could arise from higher-than-expected slippages in
the SME and infrastructure segments. Potential stake sale by SUUTI on
behalf of GOI to any PSU entity could act as an overhang.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Deep franchise value
CHANGE
Initiate coverage with BUY rating and TP INR1,353
Axis Bank has one of the best deposit franchises and has added significant
branches in the last couple of years the benefits of which we expect to
accrue. We expect healthy earnings CAGR of 23% over FY11-13E with
average ROEs & ROAAs of 20.4% and 1.56% over the same period. It is one
of our top picks in the sector.
CATALYST
Decline in wholesale deposit costs and stable asset quality
We expect steady to declining wholesale deposit costs due to slowing
credit demand will benefit Axis Bank’s margins; lending rate hikes also to
cushion margins. Infrastructure and SME exposure remain a key risk to
asset quality but we expect SME’s to hold up better than last cycle and
infrastructure is a sector specific risk rather than a bank specific risk.
VALUATION
Valuations remain extremely attractive, for a proven franchise
It currently trades at 1.6x FY13E ABV (with ROEs of 20.1% over FY11-13E),
which is below its long-term average multiple of 2.45x. Downside risks to
our TP and estimates could arise from higher-than-expected slippages in
the SME and infrastructure segments. Potential stake sale by SUUTI on
behalf of GOI to any PSU entity could act as an overhang.
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