HDFC Securities is bullish on Axis Bank has recommended buy rating on the stock with a target price of Rs 896 in its research report dated April 26, 2019.
HDFC Securities' research report on Axis Bank
Slippages dipped QoQ (~2.48% vs. 3.22%) led by a reduction in corp (3% ann.) and retail (40bps) slippages. Only a single corp a/c (Rs 3.35bn) slipped outside the BB and below rated book. Exposure to BB and below rated advances was ~2% of the book. As the pool of identified stress moderates, we expect slippages to trend down over FY19-21E (~1.9%). NPA provisions dipped ~87/67%, even as PCR improved. Std asset provisions jumped to ~Rs 7bn due to a change in a/c policy (see Page 2). Consequently, our provisions increase to ~1.6% vs. 1.1% earlier over FY19-21E, to accommodate higher provisions on std assets. Our NPA provision assumptions remain largely unchanged (1.46%). Further, a sustained increase in coverage (+200bps QoQ to ~62% calc.) is a positive.
Outlook
The strong 4Q performance bolsters our stance on meaningful change at the bank. Maintain BUY with a TP of Rs 896 (2.8x Mar21E ABV of Rs 310+Rs 30 for subs).
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