Axis Bank was the top Nifty gainer on April 25 morning, up over 4 percent, a day after the private sector lender reported a strong set of fiscal fourth-quarter earnings, prompting brokerages to retain their bullish stance.
At 10.47 am, the stock was trading at Rs 1,108.20 on the National Stock Exchange, up 4.23 percent from the previous close.
India's third-largest bank swung back to profit and saw a recovery in margins coupled with healthy deposit growth.
Jefferies shared a “buy” rating on the stock, with a target price of Rs 1,380 a share. The Q4 surprised positively as profit surpassed estimates by 13 percent, the brokerage said.
The stock is trading at attractive valuations of 1.7 times (x) FY25 adjusted price-to-book (PB) or 10x PE, analysts at Jefferies said.
Axis Bank reported a net profit of Rs 7,129 crore against a loss of Rs 5,728 crore in the year-ago period. Net interest income (NII) also grew by 11 percent to Rs 13,089 crore.
Analysts at Morgan Stanley also remain positive, sharing an “overweight” call on the stock and a target price of Rs 1,450. Interest income beat estimates due to gains in profit-before-tax (PBT), it said.
A key positive in the Q4 scorecard was the recovery in margins from the previous quarter as the cost of funds stabilized.
The bank’s net interest margin grew better-than-expected at 4.1 percent, up 5 basis points QoQ against an expected decline of 7 bps, analysts at Antique said.
"Given the pace of increase in cost of funds have come off and if policy rate remains unchanged, then NIMs could stabilize in this narrow range going ahead," the brokerage firm said. It retained a “buy” call on the counter with a target price of Rs 1,275.
One basis point is one-hundredth of a percentage point.
Deposit acceleration is a key re-rating catalyst
Deposit acceleration will also act as a key re-rating catalyst for Axis Bank, Morgan Stanley has said.
Axis Bank's deposits grew stronger than credit, up 13 percent YoY and 6 percent QoQ led by higher growth in CASA.
Credit growth was up 14 percent YoY and 3.5 percent QoQ due to slower corporate growth and a slowdown in SME loan book.
The lender's asset quality was good too. Gross slippages moderated to 1.6 percent of loans, leading to an improvement in the gross non-performing asset (GNPA) ratio, which was down 15 bps QoQ to 1.4 percent and NNPA by 5 bps to 0.3 percent.
So far this year, the Axis Bank stock has declined over 3 percent against a 3 percent gain in the benchmark Nifty 50.
Analysts at Emkay said Axis Bank is inexpensive when compared to peers. "Valuations remain low at 1.5x FY26E ABV vs some large peers’ at over 2x. We expect the bank to log a healthy RoA of ~1.8 percent over FY25-27E and retain a 'buy' rating with a target price of Rs 1,400 per share," they said.
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