Karvy Stock Broking has maintained its buy stocks rating on Axis Bank with a target price in its March 19, 2009 research report.
AXIS Bank CMP: 341
Target Price: Rs. 629
Checkout: Multibagger - Buy Stocks Recommendation On Axis Bank
"We have revised our Axis Bank earning estimates after a visit to the bank's senior management; we expect that the bank's credit growth would moderate to 31.5% (Y/Y) to Rs 1,146 billion from our earlier credit book estimate of Rs 1,226 billion in FY10. Net interest margin is estimated to shrink by 30 bps to 2.57% in FY10.The bank's core fee income growth momentum is expected to come down to 28% (Y/Y) in FY10 from 70% in FY08 and 50% in 9MFY09. The bank's management did not provide with any guidance or estimates on non-performing assets front; we expect 152% (Y/Y) rise in gross NPA in FY10 to Rs 21.5 billion and increased credit cost to 1.3% in FY10 from 0.71% in FY08 and 1.1% 9MFY09."
Key takeaways of the meeting are
Moderation in credit growth:
Axis Bank's management is of the view that in FY10 SCBs' and the bank credit book would grow by around 18-20% and 28-35% (Y/Y) respectively; we have slightly reduced our credit growth assumption to 31.5% (Y/Y) to Rs1,146 bn. Focus on CASA improvement and cost of deposits: Relatively slower growth in credit book would reduce undue dependence on term deposits and declining whole-sale deposits rates would also improve overall cost of deposits. According the bank's management total whole-sale deposits contributes almost 35% of total deposits; average cost of whole-sale deposits was close to 7.75%.
Margin under pressure:
The Bank's management indicated there would be strain on net interest margin; we expect that in FY10 margin would come by 30 bps to 2.57% from estimated NIM of 2.87% for FY09.
"We increase our earning estimates for FY09 by 5.0% to Rs 17.7 billion and reduce for FY10 by 9.6% to Rs 15.5 billion and reduce our target price by 29% to Rs 629 per share.We estimate the bank to record RoAE of 18.8% and 14.4% in FY09 and FY10 respectively. We re-iterate our BUY rating on the stock with a target price of Rs 629 at 2.2x adjusted book value FY10," says Karvy Stock Broking's research report.
Mkt Cap 12,862.81
P/E 8.06
Div 60.00
EPS (TTM) 44.44
B/V: 244.29
Mkt Lot 1.00
FV 10.00
Download stock report PDF here
