Axis Bank Q4 net profit at Rs 1,505 crore; should you buy, sell or hold?

The Axis Bank stock has been in an uptrend in 2019 so far, up nearly 20 percent. That also reflects in the fact that the private sector lender turned profitable in the March quarter compared to loss reported in the year-ago period.

It posted a profit of Rs 1,505 crore for the quarter ended March 2019 on better asset quality and decline in slippages.

In January-March quarter, it set aside Rs 1,300 crore for provisioning against self-identified stressed assets, over and above the regulatory norms, as part of its new “conservative” approach under the new leadership.

Reacting to the earnings, CLSA maintained its buy rating but raised its target price to Rs 890 from Rs 840 earlier. Jefferies has put out the most aggressive target of Rs 960 which translates into an upside of nearly 30 percent from April 25 closing price of Rs 740.

Here’s how global brokerage firms reacted post Q4 results of Axis Bank:

CLSA: Buy| Target raised to Rs 890 from Rs 840 earlier

NPLs were stable but CASA disappointed. Pick-up in CASA is key in supporting its growth ambitions, said the CLSA note.

Stable delinquencies helped bring gross NPLs down to 5.8 percent. Earnings should see a turnaround from FY20, said the note. The bank may look to raise capital over the next 12-18 months which is also positive.

Jefferies: Buy| Target: Rs 910

The bank witnessed strong revenue momentum which was in-line with estimates although opex was 4 percent ahead of estimates.

In spite of one large NPL, the overall slippage came in below Street expectation which was the key positive. Provisions were beefed up which should materially smoothen out from FY20 onwards.

The stock remains the top pick in the sector. FY20 EPS estimate was cut by 1.8 percent due to a flattish margin build-up. The global investment bank forecast a 12 percent Adj BV CAGR in FY19-21.

Deutsche Bank: Buy| Target Rs 875

The asset quality has improved which is a positive sign but net interest margins which were stable fell below expectations.

The private sector lender is moving towards more conservative provisioning. “We expect growth & profitability to be back on focus from FY20,” said the note.