Shares of Axis Bank were in focus today after brokerage CLSA raised its target price on the banking stock. The revised target price of Rs 1,100 is 37 per cent higher to the Thursday’s closing of Rs 802.25. The previous target price for the banking stock was Rs 1,050. The Axis Bank stock touched an intraday high of Rs 820.5, gaining 2.27 per cent on BSE. The stock is trading higher than the 5 day, 20 day, 50 day, 100 day and 200 day moving averages Total 1.15 lakh shares of the firm changed hands amounting to a turnover of Rs 9.38 crore on BSE.
Market cap of the bank rose to Rs 2.48 lakh crore on BSE today. Axis Bank stock has gained 0.75 per cent in one year and risen 19.08 per cent since the beginning of this year.
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On Axis Bank, CLSA said while the acquisition process of Citibank’s consumer businesses in India will be ‘tough’, its current valuations are ‘undemanding.
“Acquisition of Citibank’s India business could be tough from a customer retention perspective,” said a note from CLSA analysts.
“While capital raise overhang remains, we highlight that Citi’s retail business would have contributed just 3-4% to consolidated FY24 earnings and impact from lower customer retention would be just 2-3% on earnings,” CLSA said.
The brokerage said the lender’s valuation of 1.5 times September 2024 estimated Price to Book (PB) ratio is undemanding and offers the best risk-reward in the sector.
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“On a relative basis, ICICI Bank 1.98 %’s valuation premium to Axis bank at 60-65% is too high for 1-1.5% ROE differentials, in our view,” said CLSA. “While Axis’ liability franchise will remain inferior to ICICI’s, Axis has matched ICICI on risk metrics and asset-side improvement.”
ICICI Direct has given a target of Rs 970 for Axis Bank. The stock can be bought in a range of Rs 780- Rs 815. Axis Bank is focusing more on the retail segment, which has a share of nearly 60 per cent (primarily mortgage loans). More than 80 per cent of its unsecured loans are given to the salaried segment, ICICIdirect said.
“We believe pedalling business growth with higher share of unsecured loans in incremental business will continue to aid margin uptick. The bank has cumulative provisions of 134 per cent of gross non-performing NPA, which provides comfort on asset quality and earnings volatility,” it said.
Robust business growth, improving operational efficiency and synergy benefits from the Citi acquisition would reflect positively on the earnings trajectory and price performance, ICICIdirect said.
The brokerage expects Axis Bank to deliver a return on asset (RoA), return on equity (RoE) of 1.5 per cent, 15 per cent, respectively, over FY22-24.
