Axis Bank shares fell over 5% to the day’s low of Rs 1,034.75 on Wednesday notwithstanding its December quarter earnings which were higher than what Street expected. Positive commentary by a couple of top brokerages failed to cheer the investors as selling pressure in top banking counters prevailed.
Following its Q3 earnings on Tuesday, Morgan Stanley reiterated an ‘Overweight’ stance while Nuvama maintained a ‘Buy’ view. However, Motilal downgraded the rating to ‘Neutral’ seeing challenges on the growth front.
The fourth largest private sector lender reported a 4% year-on-year jump in its standalone net profit to Rs 6,071 crore for the said quarter. It was Rs 5,853 crore in the last-year period. The profit was marginally higher than the ET Now Poll estimate of Rs 5,924 crore. Net interest income (NII) in the third quarter rose 9% to Rs 12,532 crore.
Read More: Axis Bank Q3 Results: Net profit rises 4% YoY to Rs 6,071 crore, beats estimate
Here’s what brokerages recommended:
Morgan Stanley: Overweight | Target: Rs 1,450
Morgan Stanley remains overweight on Axis Bank for a price target of Rs 1,450. Calling its Q3 numbers “good”, the US brokerage trimmed growth estimates on tight liquidity conditions. Both asset quality and core PPOP (pre-provision operating profit) topped estimates. Axis also delivered strong improvement in its franchise, the brokerage noted.
Nuvama: Buy | Target: Rs 1,215
Nuvama has rolled forward the base, yielding a target price of Rs 1,215/2x BV 1Y forward from an earlier target price of Rs Rs 1,130. Its ‘Buy’ recommendation is based mainly on valuation though a near-term earnings vulnerability is not ruled out, the brokerage said.High LDR (loan-to-deposits ratio) and lower growth are negatives for the lender, Nuvama said. Commenting on its Q3 show, Axis delivered in-line NII and NIM while reporting a miss on core PPOP. The PAT was also in-line on higher trading gains in Q3FY24.
“Given LDR at above 90%, little room for LCR to fall and the CEO’s comment on deposit challenge, we see slower loan growth in FY25E.
With a higher share of bulk deposits and sharp increase in repo-linked loans, NIM could be vulnerable,” the brokerage said.
Motilal Oswal: Neutral | Target: Rs 1,175
While Axis Bank’s Q3 earnings were in-line with estimates of Motilal, the brokerage has cautioned investors on growth and NIMs front. “We cut our FY25E EPS by 8% considering an increase in costs and margin pressures. Moreover, with a high CD ratio of 93%, we estimate Axis Bank to deliver a 15.7% CAGR in loans over FY24-26E, slower than peers’,” Motilal said in a post-earning stock review note.It has downgraded its rating to Neutral with a revised target price of Rs 1,175.
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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
