Axis Bank shares plunged 7 per cent in Thursday's trade, taking its 5-day fall to 12 per cent. The fresh fall came as stress in unsecured segment and low recovery led to elevated credit cost for the private lender in the June quarter, even as top line and core operating performance were satisfactory, aided by stable margin and low opex growth. Analysts cut their FY25 earnings estimates for Axis Bank in 5-6 per cent range. They suggested targets in the range of Rs 1,175-1,550 on the stock.
The Axis Bank stock tanked 6.75 per cent to hit a low of Rs 1,156 on BSE. A soft quarter does not change structural thesis, said YES Securities as it suggested a revised target of Rs 1,550 on Axis Bank.
"The stress in unsecured does not seem to be contagious but the credit behavior of the portfolio will be key monitorable considering industry wide trend observed during the quarter under review," said PhillipCapital while suggesting a target price of Rs 1,460 on the stock.
Nuvama Institutional Equities said Axis Bank delivered in-line Q1 profit, but a miss on core income. The sequential rise in loan to deposit ratio (LDR) and a sharp increase in credit cost were key negatives, it said.
"NII ex-tax refund was up 1 per cent QoQ. While interest recovery from NPLs in NII is much lower QoQ in Q1, that is true for all peers. NIM adjusted for tax refund is 3.99 per cent versus reported 4.05 per cent. Credit cost rose to 1 per cent from 50 bps YoY even though slippage ratio fell 5 bps YoY due to lower recoveries and higher provisions on unsecured loan," it said.
This brokerage cut its target price on Axis Bank by 5 per cent to Rs 1,430 from Rs 1,500 but retained its ‘Buy’ as Axis Bank continues to trade at a discount to peers. The brokerage also sees a lack of other investment options in large-cap BFSI.
"We don’t see any further leeway for NIM to expand since LDR is at 92 per cent (up 194 bps QoQ). While the management attributed the rise in GNPA and provisions to timing difference leading to protracted recoveries and higher write-offs, net slippages spiked QoQ largely. Credit costs in remaining quarters of FY25 could normalise as recoveries improve. We increase credit cost estimates for FY25/26E by 12bps each to 55bps and cut core EPS by average 5 per cent," Prabhudas Lilladher said.
This brokerage has cut its Axis Bank price target to Rs 1,425 from Rs 1,450 earlier.
Antique Stock Broking said PAT missed its estimates on account of higher credit cost which was on account of increased flow-through of agriculture slippages and lower recoveries from the wholesale book. It still finds Axis Bank valuations reasonable and suggested a target of Rs 1,375. HDFC Institutional Equities suggested a target price of Rs 1,260.
Motilal Oswal cut its earnings estimates by 5.6 per cent for FY25 and 7.8 per cent for FY26, as it moderates its growth assumptions and builds in higher credit costs. It suggested a target of Rs 1,175 on the stock.