Accumulate Axis Bank; target of Rs 691: KRChoksey
Advances at INR 4,209 bn have grown at 21.2% yoy/2.6% qoq. Retail and SME loan book grew 29% yoy and 27% yoy, respectively while corporate book grew by 12% yoy led by 49% yoy growth in working capital loans. NIM (calc.) for the quarter has come in at 3.2% and has displayed positive traction.Though sequentially up, NIM contraction on yoy basis has only been 4 bps. This can be partially attributed to reduction in GNPAs/improvement in asset quality and partly due to increasing share of unsecured lending. Non-interest income at INR 26 bn is flat qoq/-23.7% yoy. Total income at INR 73 bn is down 5.3% yoy/+2.8% qoq. On yoy basis, de-growth in overall total income has come on account of non-interest revenue.
We expect ROE to improve to 12-13% mainly on account of pick up in advances growth and subsiding credit costs. We continue to value the stock at 2.5x FY20 ABVPS translating into value per share of INR 691; recommend to ACCUMULATE.
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Source: Money Control