Axis Bank stock rises most on Sensex, Nifty after strong Q2 earnings

The Axis Bank stock opened higher in early trade today after the private sector lender reported a 83% rise year-on-year in its net profit at Rs 790 crore for the quarter ending September on the back of strong growth in core income and a decline in provisions for bad loans. The stock rose as brokerages raised their target price on strong Q2 earnings.

The stock rose up to 3.76% or 23 points to Rs 632.90 on the BSE. The stock which closed at 609.95 on Friday opened with a gain of 2.80% at 627 level on BSE.  It was the top gainer on both Sensex and Nifty today.

On Nifty, the stock was  trading 2.91% higher at 628.45 level.

The large cap stock has been gaining for the last four days and has risen 10.57% during the period.

It has gained 10.81% since the beginning of this year and 15.41% during the last one year.

The bank had clocked a net profit of Rs 432 crore in the July-September quarter of 2017-18. Total income rose to Rs 15,959.37 crore during the second quarter of 2018-19 as against Rs 13,820.62 crore in the same period of the preceding fiscal.

The net interest income (NII) grew by 15 per cent year-on-year to Rs 2,542 crore as against Rs 2,208 crore, the bank said.

The net non-performing assets (NPAs) fell to 2.54 per cent as on September 30, 2018 as against 3.12 per cent a year ago same period. However, gross NPAs worsened to 5.96 per cent of gross advances from 5.90 per cent in the year-ago quarter.

Provisions and contingencies for the quarter fell to Rs 2,927.38 crore from Rs 3,140.41 crore parked for September quarter of 2017-18.

What brokerages say 

Credit Suisse is neutral on the stock with a target price of Rs 570. Common equity tier one capital ratio is comfortable at 11.7% for bank to maintain current pace of growth. With slippages slowing and coverage at 59%, the brokerage expects credit cost to moderate to lesser than 1% in FY20 As bank has reduced exposure to high-yielding corporate segment, pre-provision operating profit  return on assets has fallen to 2.2%.

Nomura raised its target price to Rs 750 from Rs 630 and said core performance improves along with stability in asset quality. Pre-provision operating profit improving and credit costs set to normalise expect return on equity of 15%/16.5% in FY20/21 forward.   The brokerage maintains buy rating on the stock.

CLSA gave a buy call with a target price of Rs 750 from Rs 690, expects return on equity of 15% from FY21. Key positive was moderation of slippage to 2.7% after which its sees credit costs falling sharply FY 20 onwards.

Jefferies too gave a buy call on the stock with a target price of Rs 720. Seeing near completion of non-performing loans recognition cycle, FY19 PAT estimate cut by 8.5% on higher credit costs.

CITI said even as slippages moderate, elevated credit costs could continue to limit ROA/ROE expansion. Impending CEO change could lead to some business consolidation in short term. Maintain neutral stance with a  target price of Rs 610.