Axis (Enam) :: Diwali Muharat Top Picks - 2019

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Axis/ Enam: Diwali muhurat top stock picks 2018

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Axis-New Year Picks - 2017

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Axis Bank - Trending From Good to Better; Result Update Q4FY15 ::Edelweiss

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Axis Bank: Impressive growth leading to healthy earnings numbers :: Kotak Securities

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Impressive growth leading to healthy earnings numbers. Axis Bank reported a
stable earnings growth of 18% yoy on the back of 22% revenue growth. Loan growth
was well ahead of industry average at 23% yoy while the impact of the recent base rate
cut was negligible qoq. The transition to retail is going well both from loans and
contribution to fees perspectives. Improving macro is giving us comfort to maintain our
positive view on the bank. Maintain ADD with TP revised to `550 (from `525 earlier).

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Q3FY15 Result Review - Axis Bank :: HDFC Securities

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Axis Bank | Q3FY15 Result Update | Strong performance continues with healthy advances growth, better NIM and stable asset quality.. Upgraded to ‘BUY’ with the revise target price of Rs 600/- :: IndiaNivesh, report

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Axis Bank - Sustains strong momentum…. :: ICICI Securities

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Axis Bank - Asset Quality Shines, Retailisation on Track; Result Update Q3FY15 :: Edelweiss, report

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Axis Bank (3QFY15) : On a firm axis. Maintain BUY :: HDFC Securities

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Axis Bank: A steady performer :: Kotak Sec, links

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A steady performer. Our analysis of Axis Securities shows that a large share of
disbursements in retail (~60%) is originated from this subsidiary. Growth should remain
buoyant in the retail portfolio in the medium term as the bank is building scale with
distribution of retail assets increasing across its branches. Despite the recent
outperformance, we continue to like the transformation that we are seeing in the bank,
which initially was reflected in liabilities and now moving towards loans. Maintain ADD
with TP increased to `525 (from `430 earlier).

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AXIS BANK -- BUY TARGET PRICE: RS.446 :: Kotak Sec, PDF link

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BUY Axis Bank -- Healthy quarter on operational front…. :: ICICI Securities

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Axis Bank|Q2FY15 Result Update | Strong performance continues with healthy advances growth, better NIM and stable asset quality.. Upgrading to ‘BUY’ with the revise target price of Rs 450/- (P/ABV of 2.1x for FY16E) :: IndiaNivesh

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Axis Bank :: Angel Broking Diwali Top Picks (Diwali Muharat)

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J.P. Morgan - Axis Bank Ltd

Axis Bank Ltd (AXSB IN) 4Q14: Strong NIMs on better funding; stable asset quality		Overweight Price: Rs1,519.80 23 Apr 2014 Price Target: Rs1,600.00 PT End Date: 31 Mar 2015

Axis Bank reported 4Q14 PAT of Rs18.4bn, up 19% y/y and 6%>JPMe. They key surprise was a sharp spike in margins – most other metrics were largely in line. We think the stock should continue to re-rate given the improving balance sheet quality with a larger share of retail. This offsets the growth and asset quality stresses from the wholesale loan book. Despite the recent rally, the stock is barely at -1sd and still offers value, in our view.

Table 1: 4Q14 result table

	4Q13	3Q14	4Q14	YoY	QoQ	Comments
NII	26,647	29,840	31,658	18.8%	6.1%
Non-int inc	20,072	16,444	22,134	10.3%	34.6%	Includes Rs1.4bn of repatriation of profit from overseas branches
Opex	18,721	20,134	21,314	13.9%	5.9%
PPOP	27,998	26,150	32,477	16.0%	24.2%
Provisions	5,954	2,025	5,052	-15.1%	149.5%	Higher contingency provision of Rs2.55bn led to increase in provisions
PBT	22,044	24,125	27,425	24.4%	13.7%
Tax	6,492	8,084	9,002	38.7%	11.3%
PAT	15,552	16,041	18,423	18.5%	14.8%
NIM	3.70%	3.71%	3.89%	0.19%	0.18%	Lower funding costs led to improvement in margins
ROA	1.70%	1.70%	1.78%	0.08%	0.08%
Cost to Income	40.1%	43.5%	39.6%	-0.4%	-3.9%
Tax rate	29.5%	33.5%	32.8%	3.4%	-0.7%
Balance sheet data
Loans (Rs bn)	1,970	2,115	2,301	16.8%	8.8%	Loan growth driven by strong retail loan growth
Deposits (Rs bn)	2,526	2,624	2,809	11.2%	7.1%
Credit to Deposit	78.0%	80.6%	81.9%	3.9%	1.3%
CASA Ratio	44.4%	42.6%	45.0%	0.6%	2.4%	Higher Savings balances led to improvement in CASA
Asset Quality
Gross NPA	23,934	30,082	31,464	31.5%	4.6%
Net NPA	7,041	10,034	10,246	45.5%	2.1%
NPA coverage (%)	70.6%	66.6%	67.4%	-3.1%	0.8%
Gross NPA (%)	1.06	1.25	1.22	0.16	-0.03
Net NPA(%)	0.32	0.42	0.40	0.08	-0.02
Non-interest income
Fees	16,182	14,560	17,800	10.0%	22.3%
Trading profits	2,378	350	2,170	-8.7%	520.0%
Misc	1,513	1,540	2,160	42.8%	40.3%
Total Advances	1,969,660	2,114,673	2,300,668	16.8%	8.8%
Large Corporates	977,038	1,024,373	1,022,378	4.6%	-0.2%
SME	295,449	315,940	355,020	20.2%	12.4%
Agri	157,573	133,100	178,360	13.2%	34.0%
Retail	539,600	641,260	744,910	38.0%	16.2%

Source: J.P. Morgan estimates, Company data.

· Margin spike. Margins rose 18bp q/q to 3.89%, ahead of expectations. Management attributed it largely to lower funding costs – improving CASA ratios (savings balances surged 12% q/q), FCNR deposits and increased share of retail in the TD portfolio. Management also mentioned that their FY15 margins are likely to stay above the bank’s traditional margin target of 3.25%-3.5%. Margins could stay strong through FY15 if rates stay elevated, given Axis’ gathering strength of the retail deposit franchise.

· Asset quality stable. Headline asset quality improved with NPL delinquency at 0.6% v/s 1.17% in the previous quarter. However, restructuring spiked at Rs11bn, 2.6% of loans. Management guided restructuring+slippages of Rs65bn (vs Rs57bn in F14); credit costs are expected to be flat next year. The stress continues to be focused on the large and mid-corporate segments: retail and SME asset quality has stayed very robust and show no signs of weakening.

· Strong retail growth. Retail assets grew 38% y/y and are now 32% of the loan book. Management sees strong growth in the segment driven by both strong demand and deepening distribution – retail assets are now sold out of 1700 branches. Internal origination is now ~33% of new retail loans. Incremental focus will be on non-mortgage segments such as LAP, auto loans and unsecured – this should be yield and margin enhancing over the next 1-2 years.

Table 2: Dupont table

	1Q12	2Q12	3Q12	4Q12	1Q13	2Q13	3Q13	4Q13	1Q14	2Q14	3Q14	4Q14
NIM	2.95%	3.42%	3.13%	2.82%	3.06%	3.23%	2.98%	2.91%	3.52%	3.56%	3.16%	3.06%
Fees/Assets	1.88%	2.06%	1.92%	1.90%	1.66%	1.92%	1.74%	1.93%	1.65%	2.13%	1.71%	1.93%
Opex /Assets	-2.28%	-2.50%	-2.21%	-2.23%	-2.18%	-2.42%	-2.09%	-2.05%	-2.21%	-2.37%	-2.13%	-2.06%
Provisions/Assets	-0.30%	-0.69%	-0.62%	-0.18%	-0.36%	-0.71%	-0.46%	-0.65%	-0.87%	-0.83%	-0.21%	-0.49%
ROA	1.61%	1.57%	1.61%	1.68%	1.62%	1.56%	1.61%	1.70%	1.73%	1.65%	1.70%	1.78%

Source: J.P. Morgan estimates, Company data.

Figure 1: Lower funding costs led to improvement in margins

Source: Company data.

Figure 2: Strong growth in savings balances led to improvement in CASA

Source: Company data.

Figure 3: Retail loans mainly comprises of secured housing loan portfolio

Source: Company data.

 

 

Investment Thesis

We are OW on the stock, as:

· The bank has significantly de-risked the balance sheet over the last year. The focus of the bank has been on low-risk retail loans, which we believe is a good strategy in the current weak macro environment. Retail loans now comprise ~32% of the loan book vs. 26% in 2Q14.

· The bank has focused on building a very strong retail franchise, and the aggressive branch push has started to yield results. The low-cost deposit for the bank has remained stable despite competition and the high rate environment, which has resulted in lower COF for the bank.

· We believe current valuations are attractive in the context of improving return ratios and hence expect the stock to re-rate further.

Valuation

Our Mar-15 PT of Rs 1,600 is based on a two-stage Gordon growth model implying 1.7x Mar-15E book. Our valuations factor in cost of equity at 16.4%, normalized ROE of ~19% and terminal growth of 5%.

Risks to Rating and Price Target

The key risks include: (1) The bank’s high exposure to large infrastructure projects could result in lumpy asset quality shocks in the medium term; and (2) Retail assets are the main growth driver for the bank, so any slowdown or increasing competitive scenario in retail loans could impact loan demand in the near term.