Axis Bank shares: Why this stock fell 6% despite 23% jump in Q1 profit? Targets by foreign brokers

Despite reporting a 23 per cent surge in June quarter profit, Axis Bank Ltd shares fell 6 per cent in Monday's trade after the private lender's Q1 net interest margin (NIM) disappointed investors. The reaction mirrored that of HDFC Bank, whose shares declined about 5 per cent following a NIM miss.

On Monday, Axis Bank shares were down 5.54 per cent lower at Rs 1,255.25. The consensus target on the stock, which included fresh targets by 32 brokerages, stood at Rs 1,579.65, implying 25 per cent potential upside for the stock.

Axis Bank reported a mixed Q1FY27, with healthy balance-sheet growth offset by continued margin pressure, said JM Financial. Axis Bank's growth remained healthy, but profitability still meaningfully lagged that of ICICI Bank, warranting a gap in their valuations, the domestic brokerage said.

"We build in an average RoA/RoE of 1.5 per cent/14 per cent over FY27–28E. We largely maintain our EPS estimates and reiterate BUY with an unchanged target price of Rs 1,575, valuing the bank at 1.7x FY28E BVPS," it said.

The third largest private bank said its NIM slipped 16 basis points quarter-on-quarter to 3.46 per cent. The management is aiming to pull it back to 3.8 per cent over the next 12–15 months.

Foreign brokerage UBS maintained a Buy rating on Axis Bank with a target price of Rs 1,620. HSBC set a target of Rs 1,600, while JPMorgan pegged the stock at Rs 1,590. CLSA assigned a target of Rs 1,550, Nomura valued the stock at Rs 1,545, Investec set a target of Rs 1,540, and Macquarie pegged it at Rs 1,490. Jefferies was bullish, with a target price of Rs 1,700.

Analysts noted that higher other income and lower provisions led to profit beat and that the uptick in gross NPAs to 1.3 per cent sequentially was due to seasonally higher agri NPAs, which should ease. 

"We believe Axis will be a key beneficiary of FCNR flows, which should help retrace margins. This coupled with lower LLP should drive-up RoA from 1.4 per cent in FY26 to 1.6–1.8 per cent over FY27–29E. Factoring improvement in return ratios and due to lower valuations, retain ‘BUY’ with a target of Rs 1,650," Nuvama said.

Ashika Stock Broking said Axis Bank's Q1 operating performance was below its estimates, with NII, PPOP and PAT missing its expectations by 3-14 per cent. 

"However, business momentum remained healthy, with strong growth in advances and deposits while asset quality continued to remain resilient on the back of strong provision buffers," it said.

With a strong capital position, healthy provision buffers and a diversified business franchise, the bank remains well placed to deliver sustainable growth while maintaining stable asset quality despite an uncertain macroeconomic environment , said Arihant Capital.

"Hence, We revise our estimates and rating to “Accumulate” with a target price of INR 1,499, valuing the stock at 1.51x FY29E ABV, awaiting clearer signs of growth momentum," it said.