Buy Axis Bank Ltd For Target Rs.1,147- LKP Securities
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Result and Price Analysis
Axis Bank reported a decent result with positive takeaways being 1) Accomplishing the aspirational ROE of more than 18% for 1HFY24, 2) Credit growth (22.8% YoY, 4.5% QoQ) stood strong. 2) NII growth stable at 18.9% YoY and 3% QoQ, on the back of stable NIMs to 4.11% (expected). 3) Disbursement in wholesale and SME loans up, 4) Strong contingent provision buffer (1.3% of gross loans), 5) NPA (GNPA/NNPA ratio 1.96%/0.41%) numbers improved sequentially driven by lower slippages and steady recoveries. 6) restructuring (20bps of GCA) squeezed further and at manageable level with 21% coverage, However negatives are 1) Sequential de-growth in PPOP, and CDR bottleneck of 94%. Furthermore, We believe the negatives are well provided and growth shall continue.
NPA ratio improvement continues; restructuring narrowed down further
Axis Bank’s total slippages came lower at ?32.6bn v/s ?39.9bn in the previous quarter. The up-gradation & recovery stood steady at ?20bn v/s ?23bn in 2QFY24. The write-offs were ~?26.7bn. A healthy asset quality show resulted in 7.7% sequential decline in GNPA amount. GNPA/NNPA/PCR stood at 1.73%/0.36%/94% against 1.96%/0.41%/93% in the previous quarter. GNPA ratio improved across segments. Retail GNPA at 1.3%, where SME and corporate GNPA ratio is at 2.5% and 1.1% respectively. The restructured pool reported lower meaningfully at ?17.6bn (20bps of GCA) largely from retail book, v/s ?19.1bn in the previous quarter. The bank carries a provision of ~21% on restructured loans, which is in excess of regulatory limits. Around 96% of retail restructured book is secured (with LTV of 40% - 70%) and 100% provision made on unsecured retail restructured book. BB & below rated pool stable at 0.35% of gross customer assets. Fund based BB & below outstanding down by 5.8% sequentially, Moreover, Non fund based outstanding in BB & below pool was stable. 100% of restructured corporate book classified as BB & Below. The provision expenses were sequentially lower at ?8.1bn (v/s ?10.3bn in the previous quarter).
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SEBI Registration number is INM000002483
