SMC Global Institutional Equities
Axis Bank Ltd
Link To Report:
Result Update: Q3 FY20
CMP: INR 739
Target Price: INR 790
Up Side: 7%
Rating: Accumulate
Result Highlights:
Axis Bank came out with a mixed set of results for Q3FY20. While loan growth remained fairly strong, slippages remained elevated again. Provisions remained high and could remain elevated in the quarters to come and hence the stock remains range bound in the near term.
Key Investment Rationale:
· Loan growth remained strong during the quarter, again led by retail, corporate segment picked up a bit, SME remained flat:
· Slippages remained elevated, funded BB & below portfolio declined, while non fund based BB & below portfolio increased:
· NII growth was in line with expectations, however lower other income and higher provisions led to lower than expected PAT:
Valuations & View:
At the CMP the stock is trading at 2.4x its FY21E ABV. Given the incremental slippages and consequent provisions the stock might remain range bound in the near term. However, given the strong CAR 14.3% CET 1, the bank might be able to push up credit when the demand improves. Accordingly we rate the stock ACCUMULATE and maintenan target price of Rs 790.
Research Analyst:
Siddharth Purohit