Buy Axis Bank Ltd - Motilal Oswal

Axis Bank (AXSB IN; Mkt Cap USD10.9b, CMP Rs1,228, Buy)

Loans grew 46% YoY (on a base of 13% YoY growth in 3QFY10) and 12% QoQ to Rs1.23t, led by large corporate loans.

Improvement in CD ratio and higher yield on funds led to sharp improvement in margins by 13bp QoQ to 3.81% v/s our expectation of 10bp QoQ decline.

CASA growth was strong at 36% YoY on an average daily basis; average daily CASA ratio stood at ~41%. GNPA increased 9% QoQ in absolute terms. NNPA declined 6% QoQ in absolute terms. Including prudential write-offs, PCR stood at 82.7% v/s 80.2% a QoQ.

The bank's capital adequacy ratio (CAR) stood at 13.8%; tier-I ratio stood at 10.2% (including 9M profits).

Motilal Oswal upgrades profit estimate by ~3% for FY11 to factor in higher NII growth. We estimate BV at Rs462 for FY11 and Rs542 for FY12. The stock trades at 2.3x FY12E and 1.9x FY13E BV, and at 12.6x FY12E and 10.6x FY13E EPS. We expect RoE of 19-20% in FY11-13 and RoA of ~1.6% over FY11-13. Maintain Buy with a target price of Rs1,625 (3x FY12E BV) - 30%+ upside.

Source : Equity Bulls

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