Motilal Oswal - Axis Bank Limited (AXISBANK) MOSL: AXIS BANK (Buy)-Clear vision, strong execution to drive re-rating

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Motilal Oswal

Nitin Aggarwal

EUR 120.00 For Business Accounts Only

MOSL: AXIS BANK (Buy)-Clear vision, strong execution to drive re-rating

Axis Bank: Clear vision, strong execution to drive re-rating; Three-pronged strategy to achieve 18% RoE by FY22

(AXSB IN, Mkt Cap USD26.2b, CMP INR729, TP INR850, 17% Upside, Buy)

With a new CEO at its helm, AXSB has charted a three pronged strategy of growth, profitability, and sustainability for FY20-22. The bank has identified credit cost, opex and business mix as the three key growth drivers to enable it to achieve 18% RoE by FY22.
Our long-term analysis of provisioning indicates that credit cost moved to the other extreme following the turnaround in the NPL cycle. After a bad credit cycle in FY00-04, AXSB reported a sharp improvement in credit cost from 2.9% in FY04 to 13bp in the following year.
We believe in AXSB’s focus to deliver long-term sustainable growth, expecting earnings to accelerate from FY20. We, thus, expect RoA/RoE to improve to 1.3%/16.1% by FY21. We revise our PT to INR850 (2.5x FY21E ABV + INR44 per share for subs). Reiterate Buy.

New CEO – new cycle – new valuation ride

AXSB has witnessed multiple changes in its top management team (including shuffling of existing roles and responsibilities); right from the time Mr. Amitabh Chaudhry came on board as the new MD & CEO. AXSB recently highlighted that all required vacancies would be filled by FY19 and thereon, the bank will be fully equipped for growth and to deliver superior returns to stakeholders. We believe that the de-risked loan portfolio, a competent and young CEO (one of the youngest amongst large banks) with a very credible track record at HDFC Life, along with reversal in provisioning cycle will drive sharp expansion in valuation multiples for AXSB over the next few years

08/02/2019 20 EN

Underlying

Axis Bank Limited

Axis Bank is a consumer and corporate bank engaged in operations in India. Co. maintains activities in both retail and corporate banking. Co. is also active as a mutual fund in the Indian capital market. Co., through its servicing and distribution network provides a complete range of services to its investors. As of March 31, 2011, Co. operated 1,390 branches and extension counters, as well as a network of approximately 6,270 ATMs. Co. also has branches in Singapore, Hong Kong, Shanghai, the UAE, and Sri Lanka. Co. provides services in consumer and corporate banking, NRIs, Retail loans, treasury services, Capital market services and Financial Advisory services.

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INE238A01034 National Stock Exchange of India India

Provider

Motilal Oswal

Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.

Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.

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Analysts

Nitin Aggarwal

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MOSL: AXIS BANK (Buy)-Clear vision, strong execution to drive re-rating

Int'l Macro Vision: Sector Synopsis

MOSL : AXIS BANK: Exemplary performance; margins take a giant leap

AXIS BANK with less fundamental stars is reduced to Neutral

MOSL : HOME FIRST FINANCE COMPANY: Earnings in-line with sustained improvement in asset quality

MOSL : SHOPPERS STOP: Ticking the right boxes

MOSL : ERIS LIFESCIENCES: Enhanced efforts toward product launch-related activities

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