Axis Bank shares fell more than 5% to the day’s low of Rs 1,034.75 on Wednesday despite its December earnings, which were higher than what the Street expected. Positive commentary from some leading brokerages failed to cheer the investors as selling pressure in top bank counters prevailed.
Following its Q3 earnings on Tuesday, Morgan Stanley reiterated an “Overweight” stance while Nuvama maintained a “Buy” view. However, Motilal downgraded the rating to ‘Neutral’ seeing challenges on the growth front.
The fourth largest private sector lender reported a 4% yoy jump in its standalone net profit to Rs 6,071 crore for the said quarter. It was Rs 5,853 crore in the last year period. The profit was marginally higher than the ET Now Poll estimate of Rs 5,924 crore. Net interest income (NII) in the third quarter rose 9% to Rs 12,532 crore.
Read More: Axis Bank Q3 results: Net profit up 4% YoY to Rs 6,071 crore, beats estimate
Here’s what brokers recommended:
Morgan Stanley: Overweight | Target: Rs 1,450
Morgan Stanley remains overweight on Axis Bank for a price target of Rs 1,450. Calling its Q3 numbers “good,” the U.S. brokerage cut growth estimates on tight liquidity conditions. Both asset quality and core PPOP (pre-interim operating profit) exceeded estimates. Axis also delivered strong improvement in its franchise, the brokerage noted.
Nuvama: Buy | Target: Rs 1,215
Nuvama rolled forward the base, giving a target price of Rs 1,215/2x BV 1Y forward from an earlier target price of Rs 1,130. Its ‘Buy’ recommendation is based primarily on valuation although near-term earnings vulnerability is not ruled out, the brokerage said. High LDR (loan-to-deposits) and lower growth are negative for the lender, Nuvama said. Commenting on its Q3 show, Axis delivered in-line NII and NIM reporting a miss on core PPOP. The PAT was also in line on higher business earnings in Q3FY24.
“Given LDR above 90%, little room for LCR to fall and the CEO’s comment on deposit, we see slower loan growth in FY25E.
With a higher share of wholesale deposits and sharp growth in repo-linked loans, NIM could be vulnerable,” the brokerage said.
Motilal Oswal: Neutral | Target: Rs 1,175
While Axis Bank’s Q3 earnings were in line with Motilal estimates, the brokerage warned investors on a growth and NIM front. “We are cutting our FY25E EPS by 8% considering an increase in costs and margin pressures. Furthermore, with a high CD ratio of 93%, we estimate Axis Bank to deliver 15.7% CAGR in loans over FY24-26E, slower than peers. , ” Motilal said in a post-earnings stock review note. It downgraded its rating to Neutral with a revised target price of Rs 1,175.
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(Disclaimer: Recommendations, suggestions, opinions and views given by the experts are their own. These do not represent the views of Economic Times)