Accumulate Axis Bank; target Rs 1,393: SKP Securities-news18032012

SKP Securities is bullish on Axis Bank and has recommended accumulate rating on the stock with a target of Rs 1,393 in its March 15, 2012 research report.

"Axis Bank has witnessed a credit growth of 45% as against industry average of 21% over the last five years. We expect 25% CAGR in its credit over FY11-14E, as the bank is likely to consolidate and grow at 1.3x - 1.4x the industry average, maintaining profitability. Given that Axis is likely to experience a shift in its business mix the share of retail advances will increase to 28% by FY14E from 22% as on Q3FY12, while the corporate banking shall continue to dominate the mix."

"Axis's robust growth in credit has come at a cost of increased delinquencies as gross NPAs have increased in tandem with growth in advances. Although bulk slippages are expected in FY13E from the corporate accounts that were restructured during FY10 which could deteriorate the asset quality and increase the credit costs but despite this we expect the asset quality to remain under check."

"We initiate coverage on Axis Bank with an accumulate rating and a target price of Rs 1,393 per share based on two stage dividend discount model, yielding a potential upside of 9%. At CMP the stock trades at 2.4x and 2.0x PBV for FY12E and FY13E respectively. We expect Axis to continue to demand a premium over its peers owing to its strong liability franchisee, strong capital adequacy ratio, superior profitability ratios and diverse fee income set," says SKP Securities research report.
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