Axis Bank Stock Research Report by Deven Choksey Research
Analysis dated 30 September 2024
Sector: Banking
Price on Analysis date: Rs. 1192
Target Rs. 1345
(12.90% upside potential)
Target Period: 12 Months
AXSB is a prominent Indian bank that provides a wide range of financial services to a diverse clientele in
both the corporate and retail sectors. The Bank holds a robust position in the market and is supported
by a seasoned management team.
GPS strategy continues to be the key engine of growth for the bank: AXSB’s GPS (Growth-Profitability
Sustainability) strategy is designed to drive impactful change by: a) fostering a high-performance culture to boost profitability and seize market opportunities; b) reinforcing its core through significant balance sheet growth and pioneering Next-Gen technology infrastructure; and c) laying the foundation for the future with the development of Axis 2.0 digital capabilities and comprehensive bank-wide initiatives. This strategy has helped to improve overall profitability and deliver superior return ratios. In Q1FY25, NIM stood at 4.05%, which was flat on a QoQ basis.
The yields on interest-earning assets have improved 29 bps YoY. The bank has been making healthy progress on the structural NIM drivers, as shown by its YoY improvements in all of its variables. These include a) a better balance sheet mix, with loans and investments making up 88.0% of total assets, which is a 54 bps increase YoY as of June 30, 2024; b) retail and CBG advances making up 70.0% of total advances, which is an increase of 225 bps YoY; and c) the quality of liabilities measured by outflow rate improved ~ 400 bps over the last two years.
Enhancing and strengthening the Bank’s deposit franchise through new initiatives: AXSB has strategically
orchestrated a transformative plan to elevate the quality and resilience of its deposit franchise. A pivotal aspect of the bank’s retail deposits strategy entails transitioning from a ‘product-centric’ to a ‘customer-centric’ approach, aiming to accelerate deposit growth from Existing to Bank (ETB) and New to Bank (NTB) customers. AXSB has focused on firing up the New to Bank (NTB) acquisition engine for the Retail SA franchise. As of June 30, 2024, the retail Saving Account (SA) NTB deposits were up 20.0% YoY, new accounts opened up at 8.0% YoY, and balances per account were up 11.0% YoY. Project Triumph, the bank’s broad deposit transformation program, continues to focus on productivity enhancement through tech-led solutions, unlocking the top of the funnel through open market sourcing and institutionalized push on resource participation and premiumization. Project NEO drives higher transaction banking flows in the wholesale segment, leading to better current account balances. The bank continued to deliver higher-than-industry deposit growth, with total deposits growing at 12.8%YoY to INR 10,625 Bn as of June 30, 2024.
Focus on driving credit growth across all its business segments: AXSB’s advances grew 14.2% YoY/ 1.6%
QoQ to INR 9,801 Bn as of June 30, 2024, driven by the corporate segment. The bank’s better-yielding focus segments, which include select Retail, SME and Mid Corporate segments, reported a growth of 24.0% YoY, constituting ~42.0% of the total advances, up by ~1300 bps in the last four years. AXSB will continue to focus on driving growth across its business segments while following the efficient RAROC Risk-Adjusted Return On Capital) model. In the medium term to long term, AXSB believes its advances have the potential to grow 300 – 400 bps faster than the industry.
We maintain our target price at INR 1,345 per share, applying a 2.0x P/ABV multiple to the FY26E adjusted
book value of INR 671.6 per share. This implies a left-over upside of 12.9% over the CMP. We have a
“BUY” rating on the shares of Axis Bank Ltd since July 30, 2024.
To study next Research Analysis.. Click
To Study our Small Cap Calls… Click
For Mutual Fund Guidance, Click chanakyaMFguidance.com