Dear All,
Forwarding you the Result Update on Axis Bank for 4QFY2011 with a Buy recommendation and a Target Price of `1,768. (12 months).
For 4QFY2011, Axis Bank registered healthy 33.4% yoy growth in its net profit, in line with our estimates. However, NII was lower than estimated due to a sharp 37bp qoq decline in reported NIM, which was offset by stronger other income led primarily by fee income. Strong yoy growth ahead of peers in balance sheet, fee income and branch network was the key positive from the results. We maintain our Buy recommendation on the stock.
NIM disappoints but other operating parameters in fine fettle: During 4QFY2011, apart from NIM, the bank’s performance on other operating parameters was strong as evident from strong fee income growth (39% adjusted yoy), stable cost-to-income ratio at 42.2%, slippages rate contained within 1.0% and gross NPAs brought down to 1.01% with a strong 80.9% provision coverage ratio (including technical write-offs). Advances increased by robust 15.3% qoq and 36.5% yoy and deposits grew by 21.5% qoq and 33.9% yoy. Sequential growth in advances was driven by agri, corporate and SME loans. The daily average balance of CASA deposits grew by 22.7% yoy. CASA ratio declined to 41.1% in 4QFY2011 from 42.3% in 3QFY2011. Reported NIM compressed by 37bp qoq to 3.44% because of a ~400bp qoq decline in average CASA ratio, a ~120bp increase in cost of term deposits and lag in repricing of loans and lower CD ratio. Sequential NIM compression of 37bp was unusually high during 4QFY2011, as the bank had to fulfill its priority sector lending obligations through term deposits (in a sharp rise in term deposits rates scenario).
Outlook and valuation: The stock is currently trading at valuations of 2.3x FY2013E ABV. We remain positive on the bank, owing to its attractive CASA franchise, rapid branch expansion, multiple sources of sustainable fee income, strong growth outlook and A-list management. We maintain our Buy recommendation on the stock with a target price of `1,768.
Kindly click on the following link to view the Report.
If you have any further queries, feel free to call us on 022 39357600, Extn: 6864 / 6865 or mail us at advisory@angelbroking.com
With best regards,
Fundamental Advisory Desk
Angel Broking
Akruti Star,6th Floor, Road No.7,MIDC, Andheri (E),Mumbai – 93.
Call : (91) (022) 39357600 Ext. 6864,6865
Website : www.angelbroking.com
Disclaimer: Ours is an advisory role. The final decision and consequences based on our information is solely yours. Moreover, in keeping with regulatory guidelines, we do not guarantee any returns on investments. Prospective investors and others are cautioned that any forward-looking statements are not predictions and may be subject to change without notice.
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