Centrum Research recommended hold rating on Axis Bank with a target price of Rs 520 in its research report dated April 27, 2018.
Centrum's research report on Axis Bank
We retain Hold on Axis Bank with TP revised lower to Rs520. The quarter saw bank upfront a substantial part of its watchlist exposure into NPA (slippages came in at Rs165.4bn or 15% of loans annualised). Resultant, Q4’18 results were lower to our / street estimates on both profitabiity and asset quality front. With large part of stressed assets recognised, focus now shifts towards growth. Loan loss provisions is expected to remain elevated (especially in H1FY19), however with healthy core-operating profit we expect RoE to scale towards 14-15% levels by end-FY20e. Valuations at 1.9x FY20E ABV appear reasonable.
Outlook
We have revised our FY19-20E estimates on the slippages and credit cost front. The bank is starting on a clean slate as a major part of stressed assets (one of the overhang on the stock) is behind. We expect RoE to inch towards 14-15% levels by end-FY20E. Valuations at 1.9x FY20E ABV appear reasonable. Retain HOLD with TP at Rs520 (valued at 2x FY20E ABV).
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