Brokerages raise Axis Bank target price on Q3 beat but stock down 3%. Should you buy or sell?

NEW DELHI: Impressed by Axis Bank's December quarter results, where the private sector lender reported 62% YoY growth in profit on the back of 51% operating profit growth, many brokerages have raised their target prices on the Nifty Bank stock.

"Beat was across operating metrics, especially with NIMs soaring as much as 30 bps QoQ to 4.26%," ICICI Securities said. Kotak Institutional Equities, on the other hand, doesn't see material risk to its earnings forecast as the bank has higher provisions made in recent years.

However, the stock, which has delivered an impressive return of nearly 23% in the last year, lost over 3% to day's low at Rs 903.75. Here's what brokerages say on Axis Bank after Q3 results:

Morgan Stanley
Morgan Stanley remained overweight on Axis Bank post Q3 results with a target price of Rs 1200 in the next 1 year, which translates into an upside of nearly 30% from Rs 933 recorded on January 23. The PAT was 9% above estimates, and the beat was all around. The net interest margins (NIMs), fees, and costs positively surprised the Street.

JPMorgan
JPMorgan also maintained an overweight rating on Axis Bank and has a target price of Rs 1,100 for the next 1 year, which translates into an upside of 18% from Rs 933 recorded on 23 January. NIMs are primarily aided by rate hikes, and the loan growth at 15% YoY is reasonable but lower relative to largecap peers, said the note.

Kotak Institutional Equities
Kotak increased its price target from Rs 1,000 to Rs 1,100, saying that asset quality metrics are showing stable performance. "Axis Bank is broadly delivering closer to its frontline peers. We see a challenging FY2024 for most banks from a NIM contraction perspective, but return ratios are likely to hold up well with negligible downside risks," it said.

ICICI Securities
The domestic brokerage left its target price unchanged at Rs 1,130 assigning 2.3x FY24E book. NIMs settling much higher than the steady-state guidance and growth in focused segments would sustain the current earnings trajectory, it said.

Emkay Global Financial Services
Emkay raised the target price on Axis Bank to Rs 1,300 and has revised earnings estimate upward for FY23/FY24/FY25 by 7%/4%/2%, and expects the bank to deliver 1.7-1.8%/17% RoA/RoE by FY25E.

Nuvama Institutional Equities
Axis Bank is a top pick for Nuvama with an increased target of Rs 1,150. "With earnings volatility, a thing of the past, and capital raise pushed out due to strong accruals, we reiterate Axis as a ’BUY’ and top pick," it said.

Motilal Oswal
Motilal noted that the lender's asset quality continued to improve, even as slippages increased marginally, compensated by healthy recoveries and upgrades. "The restructured book moderated further, while a higher provisioning buffer provided comfort. We tweak our estimates slightly and expect Axis Bank to deliver RoA/RoE of 1.9%/17.3% in FY25," it said, while giving a target price of Rs 1,130.

Sharekhan
Sharekhan has an unchanged price target of Rs 1,140. Pick-up in retail deposits mobilisation remains the key monitorable going forward, it said.

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times)