Q3FY2019 Result Update | Banking
Feb 14, 2019
Axis Bank
BUY
CMP
`697
Performance Highlights
Target Price
`860
Particulars (` cr)
Q3FY19
Q2FY19
% chg (qoq)
Q3FY18
% chg (yoy)
Investment Period
12 Months
NII
5,604
5,232
7.1
4,732
18.4
Stock Info
Pre-prov. profit
5,525
4,094
34.9
2,811
96.5
PAT
1,681
790
112.8
726
131.3
Sector
Banking
Source: Company, Angel Research
Market Cap (` cr)
1,79,205
Beta
1.1
For Q3FY2019, Axis Bank reported PAT of `1,681cr, which is the highest in past
52 Week High / Low
734/477
11 quarters. This was supported by steady NII growth (18.4% yoy), and recovery
Avg. Daily Volume
1,84,725
of `998cr from written off accounts.
Face Value (`)
2
Retails loan drive loan growth momentum; NIM improved marginally: During
BSE Sensex
36,034
Q3FY2019, the bank’s advances grew by 13% yoy, with retail and SME growing
Nifty
10,793
at 20% yoy and 13.4% yoy respectively. The NII during this period grew by 18.4%
Reuters Code
AXBK:NS
yoy, led by advances growth and improvement in NIM. Uptrend in NIM over last
Bloomberg Code
AXSB:NATL
3 quarters was led by corporate book coupled with re-pricing of marginal cost of
funds based lending rate (MCLR) linked loans (60bps increase in MCLR in 3Q).
The return of pricing power owing to lesser competition from NBFCs and
Shareholding Pattern (%)
improving asset quality will support NIM.
Promoters
23.7
MF / Banks / Indian Fls
15.8
Elevated slippages; fresh accretion of NPA to be moderate going ahead:
Annualised slippages for Q3FY2019 was tad higher at 3.2%. However, we expect
FII / NRIs / OCBs
47.2
fresh accretion of NPA to be lower owing to (1) sub investment book has declined
Indian Public / Others
13.2
by 72% from Q1FY2017 and now stands 1.6% of advances; (2) management
stated elevated downward cycle is nearing an end; (3) PCR including technical
write-offs at 75%, bank has taken additional contingent provisions of `600cr for
Abs. (%)
3m 1yr
3yr
potential downgrade from sub investment book.
Sensex
4.5
6.1
58.6
Management guides for 18% ROE in the medium term: The bank's MD & CEO
has given ROE target of 18% in medium term, which will be driven by strong
Axis Bank
14.2
28.7
78.4
growth momentum in the retail segment and pick up in its corporate book
through improved product mix, better operating efficiency, and reduction in credit
costs to below its long-term average via improvement in asset quality.
3-year price chart
Outlook & Valuation: Axis Bank currently trades at 2.1x its FY2021E price to book
800
value (after adjusting value of subsidiaries). We expect the stock to get re-rated
700
600
owing to (1) new leadership; (2) limited stressed loan pool; (3) improvement in
500
return ratios (ROA/ROE - 1.1%/12.2% by FY2020E). We recommend Buy on the
400
300
stock with a Target Price of `860.
200
Exhibit 1: Key Financials
Y/E March (` cr)
FY17
FY18
FY19E
FY20E
FY21E
NII
18,093
18,618
21,882
25,878
32,134
Source: Company, Angel Research
% chg
7
3
18
18
24
Net profit
3,679
276
4,694
8,678
10,784
% chg
-55
(93)
1,603
85
24
NIM (%)
3.4
3.1
3.2
3.3
3.6
Jaikishan Parmar
EPS (`)
14
1
18
34
42
P/E (x)
49
649
38
21
17
Research Analyst
P/ABV (x)
3.3
3.1
2.8
2.4
2.1
022 - 39357600 Ext: 6810
RoA (%)
0.6
0.0
0.6
1.0
1.1
RoE (%)
7
0
7
12
13
Note: CMP as of 13/2/19
Please refer to important disclosures at the end of this report
1
Axis Bank|Q3FY2019 Result Update
Research Team Tel: 022 - 39357800
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Disclosure of Interest Statement
Axis Bank
1. Financial interest of research analyst or Angel or his Associate or his relative
No
2. Ownership of 1% or more of the stock by research analyst or Angel or associates or relatives
No
3. Served as an officer, director or employee of the company covered under Research
No
4. Broking relationship with company covered under Research
No
Ratings (Based on expected returns
Buy (> 15%)
Accumulate (5% to 15%)
Neutral (-5 to 5%)
over 12 months investment period):
Reduce (-5% to -15%)
Sell (< -15)
Feb 13, 2019
7