Axis Bank Ltd
Source: Company, ACE Equity, Microsec Research
Axis Bank is the third largest Private Sector Bank (in terms of business and
profitability) to have begun operations in 1994. As on 31st March 2013, the
Bank’s balance sheet size crossed over INR3.4 trillions with strong distribution
network of 1947 branches and 11245 ATMs spread across the country. It also
has overseas offices in Singapore, Hong Kong, Shanghai, Colombo, Dubai and
Abu Dhabi. It differentiated itself from other players in the industry through its
excelling in customer delivery through insight, empowered employees and
innovative use of technology coupled with its ubiquitous branches and ATMs.
Axis Bank is one of the few Indian Banks, which has smartly managed to
transform itself into a true financial conglomerate with its presence in core
banking besides, Insurance, Asset Management, Mutual Fund, Broking, Home
Finance etc.
We Initiate Coverage on Axis Bank with a BUY rating. Our rating underpins
the Bank’s strong business growth momentum, diversified revenue stream,
healthy low cost deposits (CASA) base which leads to improve in Net Interest
Margin (NIM), improving core income with healthy profitability, strong risk
management, improving asset quality with healthy Provision Coverage Ratio
(PCR), in-depth assessment of capital with strong Capital Adequacy Ratio
(CAR), improving cost efficiency, healthy Return Ratios and last but not least,
well aligned bank with the regulator’s guideline.
Axis Bank has managed to keep return ratios healthy. Among its peers it is
better placed in terms of strong return ratios. It has delivered ROE and ROA of
~19% and 1.7% respectively in FY13. We believe that Axis is likely to maintain
its return ratios over the next couple of years and may deliver ~1.6% and ~18%
ROA andROE respectively in FY15E .
On the basis of P/BV, Axis Bank is trading at lower valuation amongst top five
Private Banks. At the CMP of INR1190, the stock is trading at FY13 P/BV of
1.68x. The current valuation of 1.46x FY14E and 1.27x FY15E Book Value looks
attractive. We recommend a BUY on the stock with a target price of INR1458
(1.55x FY15E BV) with an upside potential of ~23% from the current level with
an investment horizon of 12-15 months.
Source: Company, ACE Equity, Microsec Research
Axis Bank is the third largest Private Sector Bank (in terms of business and
profitability) to have begun operations in 1994. As on 31st March 2013, the
Bank’s balance sheet size crossed over INR3.4 trillions with strong distribution
network of 1947 branches and 11245 ATMs spread across the country. It also
has overseas offices in Singapore, Hong Kong, Shanghai, Colombo, Dubai and
Abu Dhabi. It differentiated itself from other players in the industry through its
excelling in customer delivery through insight, empowered employees and
innovative use of technology coupled with its ubiquitous branches and ATMs.
Axis Bank is one of the few Indian Banks, which has smartly managed to
transform itself into a true financial conglomerate with its presence in core
banking besides, Insurance, Asset Management, Mutual Fund, Broking, Home
Finance etc.
We Initiate Coverage on Axis Bank with a BUY rating. Our rating underpins
the Bank’s strong business growth momentum, diversified revenue stream,
healthy low cost deposits (CASA) base which leads to improve in Net Interest
Margin (NIM), improving core income with healthy profitability, strong risk
management, improving asset quality with healthy Provision Coverage Ratio
(PCR), in-depth assessment of capital with strong Capital Adequacy Ratio
(CAR), improving cost efficiency, healthy Return Ratios and last but not least,
well aligned bank with the regulator’s guideline.
Axis Bank has managed to keep return ratios healthy. Among its peers it is
better placed in terms of strong return ratios. It has delivered ROE and ROA of
~19% and 1.7% respectively in FY13. We believe that Axis is likely to maintain
its return ratios over the next couple of years and may deliver ~1.6% and ~18%
ROA andROE respectively in FY15E .
On the basis of P/BV, Axis Bank is trading at lower valuation amongst top five
Private Banks. At the CMP of INR1190, the stock is trading at FY13 P/BV of
1.68x. The current valuation of 1.46x FY14E and 1.27x FY15E Book Value looks
attractive. We recommend a BUY on the stock with a target price of INR1458
(1.55x FY15E BV) with an upside potential of ~23% from the current level with
an investment horizon of 12-15 months.
