Sharekhan, Angel Broking upbeat on Axis Bank shares post Q4 result

Axis Bank beat market expectations on Wednesday with the fourth quarter net profit rising 18.36 percent year-on-year (yoy) and 14.78 per cent quarter-on-quarter (qoq) to Rs 2,180.59 crore primarily led by strong growth in other income and net interest income (NII).

Market analysts revised their target price post Q4 numbers and looking bullish on the further movement of the shares of Axis Bank.

In the past one year, the share price of Axis Bank surged 80.91 per cent to Rs 552.90 on April 29.

For the quarter ended March 2015, other income of the bank increased by 21.41 per cent yoy and 31.78 per cent qoq to Rs 2,687.31 crore led by strong growth in treasury income.

NII has reported a healthy growth of 20 per cent yoy and 5.8 per cent qoq to Rs 3,799.24 crore led by healthy advances growth.

The bank's advances grew 22.2 per cent yoy to Rs 2,81,083 crore led by the strong growth in retail book. Retail advances increased by 27 per cent yoy and stood at Rs 1,11,932 crore as on 31 March 2015.

Operating expenses of the bank grew at 16.06 per cent yoy and 6.90 per cent qoq resulting into improvement in cost-to-income ratio to 38.1 per cent against 41.1 per cent in the sequential quarter ended December 2014 and 39.6 per cent in the corresponding quarter a year ago.

Cost-to-income ratio is important for determining the profitability of a bank. The ratio gives a clear view of how efficiently the bank is being run - the lower the ratio, the more profitable the bank.

Gross non-performing assets (GNPA) of the bank increased by 30.63 per cent yoy and 5.35 per cent qoq to Rs 4,110.19 crore, which was in line with management guidance. The ratio remain unchanged on sequential quarter basis at 1.34 per cent. Net NPA increased by 28.51 per cent yoy and 5.28 per cent qoq to Rs 1,316.71 crore.

The bank also declared a dividend of Rs 4.60 per share for 2014-15 against Rs 4 per share in 2013-14.

According to a research report by Sharekhan, Axis Bank reported a strong set of numbers for the quarter ended March 2015. It has consistently improved its liability franchisee and has made impressive progress in increasing retail asset base (40 per cent of the loan book).

Contrary to the sector trends, the bank continues to report a robust asset quality and has guided for lower stressed loan formation for 2015-2016 as compared with that of 2014-2015.

Earnings of Axis Bank are likely to grow 18 per cent annually in 2015-16 and 2016-17 resulting in return on assets of 1.8 per cent. The share price can touch Rs 652 in the next few quarters.

Vaibhav Agrawal, VP Research, banking, Angel Broking, says, "Axis Bank reported a good set of numbers for the last quarter of 2014-15 with steady asset quality. At the current market price, the stock is trading at 2.1x 2016-17E adjusted book value. We recommend a buy rating on the stock."