Axis Bank cracks 9% after sharp spike in Q2 slippages, analysts cut target price

Moneycontrol News

Axis Bank fell 9.5 percent to close at Rs 464.35 per share on Wednesday as analysts slashed target price on the stock after the sharp spike in Q2 slippages.

While retaining buy call on the stock, Bank of America Merrill Lynch cut its target price to Rs 590 from Rs 650 per share and estimated Rs 12,000 crore of further new slippages in second half of FY18.

"We cut EPS forecasts by 34/13 percent for FY18/19 but good retail franchise value will drive back return on equities to 14/19 percent by FY19/20," the research house said.

CLSA also slashed its target price on the stock to Rs 612 from Rs 620 per share following lower earnings estimates, but maintained buy call as it expects asset quality/earnings to normalise.

Key positives were the pick-up in loan growth and healthy CASA growth, the research house said.

Credit Suisse lowered its target price to Rs 485 from Rs 506 per share as it cut EPS estimates by 25 percent on higher provisions. Equity dilution is likely in coming quarters, it feels.

Deutsche Bank also maintained its buy call on the stock but slashed target price to Rs 575 from Rs 598 as there was big disappointment on asset quality, though loan growth revived.

It feels recovery & resolution of non-performing loans are now even more critical. Deutsche has reduced its earnings estimates by 13/7 percent for FY18/19.

Edelweiss downgraded the stock to hold from buy with reduced target price at Rs 545 (from Rs 638 earlier) after it slashed FY18/FY19 earnings estimates by 30/14 percent and book value by 3/4 percent.

The research house also excluded the stock from its "Braveheart Series” as asset quality shocks are over-riding a strengthening retail franchise.

Axis Bank's asset quality deteriorated sharply as net NPAs came in at Rs 14,052 crore against Rs 9,766 crore in the previous quarter. The net NPA ratio too rose to 3.12 percent against 2.3 percent quarter on quarter.

The gross NPAs were reported at Rs 27,402 crore against Rs 22,031 crore in the previous quarter and the ratio came in at 5.9 percent against 5.03 percent in the previous quarter.

Its gross slippages for the quarter were at Rs 8,936 crore, which were sharply higher compared with Rs 3,519 crore in previous quarter.

The private sector lender's September quarter net profit increased 35.5 percent year-on-year to Rs 432.4 crore due to low base in year-ago quarter.