Reduce Axis Bank - Q4FY13 Results Update - Kotak

Q4FY13 results: Earnings came ahead of our expectations; however, asset quality risk persists in our view.

NII (24.2% YoY) was better than expectations on back of higher NIM (13bps QoQ; aided by capital infusion) along with moderate growth in loan book (16.0% YoY). Net profit grew 21.8% YoY mainly aided by moderate rise in tax provisions as well as operating expense. Retail book saw robust growth (43.6% YoY) as a part of conscious management strategy and now its share has gone up by 530bps to 27.4% during last one year.

Asset quality remained stable - gross and net NPAs stand at 1.06% and 0.32%, respectively. Although fresh slippage came at 0.9%, a tad below the previous quarter, addition to restructured book came higher at 1.86%, taking total stress build-up (slippages + restructuring) marginally higher than the previous quarter. As stock is currently trading near its fair value (2.0x FY14 ABV), we downgrade the stock to REDUCE from ACCUMULATE earlier with unchanged TP of Rs.1535 (2x FY14E ABV).

Source : Equity Bulls

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