Axis Bank share price tanks 5% post Q4 results, brokerages see up to 34% upside; should you buy, hold or sell? (2024)

Axis Bank share price plunged around 5% on Friday to hit a low of Rs 739 on BSE. The share price decline comes a day after the lender company posted quarterly earnings. Axis Bank, one of the largest private sector lenders in India, reported a massive 54% on-year growth in standalone profit for the quarter ended March, largely driven by significant fall in provisions and improved asset quality. The bank’s Net interest income grew by 16.7% on-year to Rs 8,819 crore with credit growth of 15% and deposits growth of 19%. So far this year, Axis Bank stock has rallied over 6%, and brokerages see further upside of up to 34% going forward. Brokerage firm Goldman Sachs has maintained a buy rating on Axis Bank shares with a price target of Rs 883 apiece.

Should you buy, hold or sell Axis Bank shares?

Prabhudas Lilladher: Buy
Target price: Rs 940

Axis Bank earnings were mixed. Loan growth was a tad higher led by retail, but the management was a bit cautious on credit growth in FY23 owing to a tougher global environment. “The likelihood of realising the RoE (return on equity) forecast of 16% seems slim in the medium term as margin recovery could be protracted and operating expenditure may remain elevated. However, balance sheet strength and improving asset quality provide some cushion. Valuation discount to ICICI Bank might widen to 20-25% (currently 16 percent) unless net interest margin improves. With RoE of 14.2% in FY24, we maintain Axis’s multiple at 2.3x FY24 ABV and cut target price from Rs 975 to Rs 940. Maintain buy,” the research house said.

Motilal Oswal: Buy
Target price: Rs 930

Analysts at Motilal Oswal said, “Axis Bank delivered a mixed performance with net earnings picking up sharply, supported by lower provisions, even as margin declined and OPEX stood elevated. Asset quality continues to improve, aided by a decline in slippages and higher recoveries and upgrades. Restructured book moderated further, while a higher provisioning buffer provides comfort.” The brokerage firm expects slippages to remain in control, enabling a sustained improvement in credit costs, though improvement in margin and cost ratios would be key to watch for. The private lender is expected to deliver a FY24 RoA/RoE of 1.6%/15.7%. Motilal Oswal maintained a ‘buy’ rating on the stock with a target price of Rs 930 per share.

ICICI Securities: Buy
Target price: Rs 1,050

According to analysts at ICICI Securities, Axis Bank’s non-NPA provisioning buffer of 1.77% against stress pool reassures moderating credit cost trajectory. However, key to 16-18% RoE trajectory will be NIM improvement (levers being asset mix change, deployment of excess liquidity, scale-up of low-cost deposits, and gradual decline in low-yielding RIDF investments). “With cost to assets remaining elevated at 2.3% and continued investment in growth and franchise build-up, management refrained from reiterating its earlier guidance of cost/asset ratio of 2.2% by the exit quarter of FY23,” they said. The Brokerage maintains ‘buy’ rating on the stock with an unchanged target price of Rs 1,050.

Emkay Global: Buy
Target price: Rs 1,020

Emkay Global retained their long-term ‘buy’ rating on the stock with a target price of Rs 1,020 given steady improvement in RoEs and reasonable valuations. “However, the bank’s recent opex conundrum (risk of upward revision in cost/asset guidance for FY23) and the potential impact on core profitability in the near term will be a drag on the stock’s performance,” it said. Key risks to the upside remain Higher-than-expected NPA formation and expenses; any signs of management instability, which has moderated a bit recently.

Kotak Securities: Buy
Fair Value: Rs 960

According to the analysts, Axis Bank has reported a steady improvement. NPL ratios and credit costs are at a six-year low and return ratios are at a six-year high. Slippages are steadily declining and their volatility is lower than in the past. They see the performance of Axis Bank similar to its larger peers but integration of Citi’s book would be a key monitorable from here. “We maintain our BUY rating with FV of Rs 960 (unchanged), valuing the bank at 2.2X book and 30X FY2024E EPS (due to charges for Citi) for RoEs of 15% in the medium term. We like Axis Bank as a good business to own among the large banks. The bank has adequate buffer to manage any unexpected shock,” the brokerage said.

(The stock recommendations in this story are by the respective research analysts and brokerage firms. TheSpuzz Online does not bear any responsibility for their investment advice. Capital markets investments are subject to rules and regulations. Please consult your investment advisor before investing.)