Axis Bank Q2 Earning Beats Estimates, Net Revenue Up 22%, Buy Stock For 30% Upside: Edelweiss

Top brokerage firm Edelweiss has given a buy rating to the stock of Axis Bank Ltd. The bank's performance was a sharp beat against the brokerage firm's expectations, driven by significant NIM expansion and low credit cost. Its CASA deposits increased 14% YoY and 7% QoQ, resulting in a CASA ratio expansion of 172bps YoY to 46.2%.

Stock To Buy: Target Price

The Current Market Price (CMP) of Axis Bank Ltd. is around Rs. 824. Edelweiss has estimated a Target Price for the stock at Rs. 1070. This stock has the potential to give a 30% return, in the upcoming 1 year. It is a large-cap stock with a market capitalization of around Rs. 277,455 crore.

Stock Outlook
Current Market Price (CMP)	Rs. 824
Target Price	Rs. 1070
Potential Upside	30.00%
52-week high share price	Rs. 919.95
52-week low share price	Rs. 618.25

Strong Financials

Asset quality improved as slippages continued to moderate. The bank's NII increased 31% YoY and 10% QoQ, driven mainly by sharp NIM expansion. Reported NIM expanded 57bps YoY and 36bps QoQ to a robust 3.96%. The bank reported trading losses of Rs. 86 crore during the quarter. However, a strong 20% YoY increase in fee income led to other income coming in at Rs. 3,941 crore, almost exactly in line with our estimate. Jump in fee income was led by a 28% YoY rise in retail banking fees. Net revenue was up 22% YoY and 16% QoQ.

Stock Upside: Edelweiss

According to Edelweiss, "Although deposits growth remained muted, we believe Axis has had an exceptional quarter on most fronts. We also believe credit growth will remain in the mid-to-high teens over FY22-24E, as growth in the wholesale segment continues to pick pace. Eventual moderation in opex and steady NIM should result in an increase in the bank's return ratios, in our view. We reaffirm our Buy recommendation with a revised target price of Rs. 1,070/share, implying a 30% upside."

Strong deposits growth

Overall advances rose 18% YoY and 4% QoQ, with fairly broad-based growth during the quarter. The corporate book grew 7% YoY and 6% QoQ, driving growth during the quarter and contributing to 43% of the incremental advances. However, on YoY basis, 71% of the incremental advances came from the retail portfolio, which was up 22% YoY and 3% QoQ. Within the retail book, SBB, Credit Cards and Rural Loans were up 69% YoY, 47% YoY and 46% YoY, respectively. The SME segment also performed well, growing 25% YoY and 9% QoQ.

Disclaimer

The above stock was picked from the brokerage report of Edelweiss. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.