ICICI Direct has given Buy recommendation for Axis Bank with a target price of Rs. 900 in its research report issued on Apr 28, 2021

ICICI Direct’s research report on Axis Bank

Axis Bank reported a strong set of numbers with a sequential pick-up in business growth, improved asset quality and better than estimated bottomline performance. NII was up 11% YoY to Rs 7555 crore aided by 7% QoQ rise in loans and stable margins, NIMs at 3.56% vs. 3.55% YoY, 3.59% QoQ. Despite ~20 bps fall in cost of funds sequentially, margins were stable as a result of higher LCR, loan mix shift toward better rated portfolios and also previous quarter had positive 8 bps impact of interest of IT refund. Other income jumped 17% YoY, 23% QoQ with fee income growing 15% YoY, 16% QoQ to Rs 3376 crore while trading gains were boosted by the sale of strategic investment of ~Rs 300 crore. Provisions during the quarter declined sequentially by 28% to Rs 3295 crore (below our estimate). This included Rs 803 crore due to change in provisioning policy for commercial banking segment. As a result, PAT came in at Rs 2677 crore, higher than estimate.

Outlook

we remain positive on the stock and arrive at a target price of Rs 900 (Rs 800 earlier), valuing the stock at ~2.1x FY23E core ABV. We maintain BUY rating.