Axis Bank (Buy) - Avendus

We lower our FY14f-FY16f PAT forecast for AXSB by up to c3% to factor the lower NIM. The FY14f NIM estimate has been cut by 8-bp to 3.13%, driven by higher cost of deposits. However, we assume the NIM to recover in the next two years. The large underperformance of AXSB in the recent three months (c29% to the Sensex and c10% to the Bankex) has partly been driven by the concerns on NIM (due to the rise in the cost of wholesale deposits) and higher NPLs. The proportion of retail deposits (retail term deposits and CASA) increased 589-bp y-o-y to c69% at the end of Jun13. Also, the 25-bp rise in the lending rate in Aug13 is likely to protect the NIM. We lower the semi-explicit period growth assumption by 1% to 19%. We apply the 12-month valuation as a benchmark to arrive at the blended TP. We rollover the TP to Sep14 and lower it to INR1,530. The TP values the stock at a one-year forward adjusted P/B of 1.55x. We retain a Buy rating.

Source : Equity Bulls

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