Stock in Action - Axis Bank

Highlights

1. Axis Bank's share price has gained over 8% year to date in 2024 but it has under performed compared to Nifty which delivered a 13.66% return during the same period.

2. Axis Bank's financial performance has grown over the past year.

3. Axis Bank's quarterly earnings report highlighted an increase in net profit in the September quarters reaching ₹7,436Cr in June

4. For Axis Bank's stock analyst forecasts positive trends for the future.

5. Axis Bank's share price moved from ₹1125 to ₹1200in the past two days showing some volatility.

6. Axis Bank stock has under performed in the market delivering a positive return of over 19.42% in the past year.

7. Axis Bank is currently trading at ₹1185 showing a 4.75% increase as of 11:52 am on NSE.

8. Axis Bank reported an 18% yoy increase in net profit for Q2 FY25 while its operating profit jumped by 24% during the same period.

9. Morgan Stanley gave an overweight rating with a target price of ₹1,445 per share.

10. As per the September quarter filings the company has 8.29% promoter holding, 33.21% DII holding and 51.78% foreign institutional investor (FII) holding.

Why is Axis Bank's share in the News?

Despite reporting subdued results for Q2 FY25, Axis Bank's share price surged 4.7% today. The stock hit an intraday high of ₹1,186 on BSE even as benchmark BSE Sensex fell by 0.4%. Analysts believe there's limited downside in the bank's valuation at current levels though many brokerages have trimmed their earnings forecast and share price target slightly to account for the weaker than expected Q2 results.

Key Hits and Misses in Q2 FY25 Results

Net Profit: Axis Bank reported a net profit of ₹6,918 crore up from ₹5,864 crore a year ago aided by a one time tax reversal of ₹550 crore.

Loan Growth: Loan growth slowed to 11% YoY compared to 14% in Q1 FY25. On a QoQ basis, loans grew by just 2% with retail loans up 2%, SME loans up 6% and corporate loans remaining flat.

Deposits: Deposits rose 13.7% YoY and 2.3% QoQ. The bank’s CASA (current account-savings account) ratio moderated by 100 basis points to 41%.

Net Interest Income (NII): Excluding one off interest from tax refunds, core NII grew by 2% QoQ. Net interest margin (NIM) remained flat at 3.99%.

Analyst Target Prices

Morgan Stanley: Overweight rating with a target price of ₹1,445, noting improved asset quality in Q2.

Nomura: Buy rating with a target of ₹1,380 highlighting a steady performance and reduced non performing loans (NPLs).

Macquarie: Outperform rating with a target of ₹1,400, citing tax write backs and treasury gains as profit drivers.

Nuvama Institutional Equities: Buy rating but reduced the target to ₹1,335 from ₹1,430 earlier.   citing improved asset quality but trimming profit estimates for FY25 and FY26.

Bernstein: Bernstein has maintained its outperform rating on Axis Bank with a target price of ₹1,250 but noted that the second quarter results offered limited upside. While credit costs improved compared to the previous quarter, the overall positive performance was considered lower quality with concerns about asset quality and weak loan growth still persisting.

Overall, while Axis Bank's Q2 results showed slower growth in loans and deposits, analysts remain positive due to improvements in asset quality and a favorable risk reward balance.

Conclusion

Axis Bank's share price has shown resilience rising 4.7% despite mixed Q2 FY25 results. While loan growth slowed and deposits saw moderate gains, the bank's net profit grew by 18% YoY, boosted by a one time tax reversal. Analysts maintain positive outlooks with target prices ranging from ₹1,250 to ₹1,445 noting improvements in asset quality. However, concerns over weak loan growth and asset quality persist. Overall, Axis Bank's long term prospects remain favorable due to its steady financial performance and limited downside risks, despite short term volatility and underperformance relative to the broader market.