Axis Bank Ltd. share price forecast

Plugging the portfolio gaps while scaling up

Ambuja Cement: We maintain our ADD rating on Ambuja Cements (ACEM), with a revised TP of INR 380/share (SOTP based). ACEM reported profit beat in Q1CY22 on strong fixed cost controls and benefitting from its low-cost fuel inventory. Unitary EBITDA rebound ~33% QoQ to INR 1,055/MT. It continues to lower its clinker factor and is also steadily increasing its TSR and WHRS capacity. ACEM noted that its recently announced expansions in east are on track. Trent: Trent reported strong Q4 print. Standalone revenue grew 53% YoY to INR11.85.bn. FY19-22 revenue CAGR stood at 15%. Store addition (125 stores) has picked up meaningfully, ensuring a healthy SSSG runway in near-to-medium term. Profitability was (EBITDAM: 12.9%; down 480bps, in-line) impacted by (1) normalisation of rental bills and (2) lower realised product margins (courtesy lower full-price sales). FY24 EBITDA estimate remains largely unchanged. We retain our SELL recommendation with an SOTP TP of INR 800/sh (unchanged), implying 30x FY24 EV/EBITDA. Persistent Systems: Persistent Systems (PSYS IN) continued its industry-best growth momentum with >9% CQGR over the past four quarters, with ~8% organic CQGR (6.8% in Q4). PSYS' strong organic growth offset the impact of contract restructuring within the IP segment in Q4. Despite attrition being 10pp above historical levels and wage inflationary environment, PSYS' core metrics point to continued momentum large client mining (USD 5mn+ >40% higher over the past year), healthy operating metrics (FY22 OCF/EBITDA ~90% above 5Y average), strong deal bookings (USD 1.2bn TCV over the past year including USD 650mn net new TCV) and hiring momentum...

Credit Growth Momentum Continues

Wait and watch on synergies; maintain BUY: Especially given the distinct and superior customer profile that gets added through this transaction, we believe that synergies are likely to be back-ended and are conditional on significant frontloading of investments. At CMP, Axis Bank provides good margin of safety; we maintain BUY with TP of INR950. Axis Bank announced the acquisition of Citibank's cards, consumer lending, and wealth businesses in a transaction that is likely to be closed over the next 9-12 months. At an acquisition cost of US$1.6bn, while the deal appears to be a bargain for Axis Bank, the value accretion from Citi's portfolio over the medium term is contingent on a host of factors including retention of existing customers, Axis Bank's ability to continually add customers of such profile and its ability to up-sell and cross-sell. Although the Citibank transaction adds significant heft to Axis Bank's competitive positioning across cards and wealth management businesses, we believe that Axis Bank will need to up its game in order to create sustainable value from the Citibank portfolio.

customers and increasing granularity (ii) Citi's portfolio would complement that of Axis as both entities have a different customer profile and (iii) it provides good cross sell opportunities to Axis which would eventually lead to synergies. In our view, the deal is positive for Axis Bank in the medium term, however the key is customer retention. With systemic asset quality risk receding and credit growth prospects improving, Axis could be one of the main beneficiaries. We raise the multiple/TP to 2.3x/Rs975 as we roll forward...

Axis Bank shells out a purchase consideration of Rs123bn for Citibank’s India consumer business to acquire: 1) loan portfolio of Rs274bn (accretion of 4% to its advance base) across credit cards, mortgage, personal & ready credit loans, assetbacked finance and small business banking; 2) 2.5mn credit card customer base
(addition of 31% to its base)

AXSB to acquire Citibank's Consumer business for INR123b AXSB announced the acquisition of Citibank's Consumer business in India, including its Credit Cards, deposits, Wealth Management, loans, customer guarantees business, Insurance distribution, and Small Banking business. It also proposed to acquire the Commercial Vehicle and Construction Equipment asset backed financing facilities, Assigned Asset backed financing portfolio, Personal loan portfolio, and servicing of Assigned Mortgages loan portfolio of Citicorp Finance (India). The total consideration of ~INR123b, along with the estimated...

Axis is the third-largest private sector bank in India in terms of asset size, with a balance sheet of >INR9tn.

Axis delivers decent growth, asset quality stable Axis Bank offers a wide range of banking services in India that includes cash and credit management services, retail banking, investment...

Tanla Platforms: Tanla reported a decent quarter with a slight miss on revenue (INR 8.8bn vs. estimate of INR 9.1bn) but better-than-expected margin performance. The gross margin of enterprise business improved +244bps QoQ to 24.6%, powered by a better mix. While enterprise growth was led by the BFSI, wholesale and government verticals, higher messaging volumes from enterprises were a result of festive season and marketing campaigns. The next phase of growth in the platform business will be powered by Wisely, whose commercial launch is expected in March 2022. We continue to maintain our positive stance, based on: (1) strong industry tailwinds as enterprises and new age startups digitise their customer engagement; (2) Tanla's capabilities built for multiple channels like SMS, voice, RCS, and WhatsApp; (3) robust growth in Trubloq volumes (~25% growth with 63% market share; processed 88bn transactions); (4) healthy addition of new clients; and (5) rich cash reserves of INR 8.8bn. We maintain our EPS estimates for FY23/24E and have a BUY rating with a TP of INR 1,880, based on 35x FY24E EPS. The stock is trading at a P/E of 38/33x FY23/24E. The Ramco Cements: We maintain our ADD rating on The Ramco Cements (TRCL) with a lower target price of INR 962/share (13x Dec-23E EBITDA). While TRCL continued to deliver strong volume growth, weak pricing and fuel price spike resulted in 42/59% YoY decline in EBITDA/APAT (despite 16% revenue growth) in Q3FY22. Unitary EBITDA fell 50% YoY to INR 758 per MT. TRCL expects margin to recover Q4 onwards on improved...

Improvement in all parameters

GNPA down 36 bps QoQ to 3.17%. R/s book steady at 0.63% What should investors do? Axis Bank's share price has given ~10% return in the past one year. This was post some correction in past few months. We believe its...

3QFY22 marks the manifestation of sequentially lower provisioning expenses (13bn v/s 17bn in the previous quarter) and 15% sequential increase in net profit at 36bn. The bank's reported slippages number were lower (41bn v/s 54bn in 2QFY22) as GNPA and NNPA ratio narrowed...

loan book were at Rs 3,332 crore and that from investment exposures stood at Rs 815 crore. Recoveries and upgrades from NPAs during the quarter were Rs 3288 crore while write-offs were Rs 1707 crore. Consequently, there were net slippages in NPAs (before write-offs) for the quarter of Rs 860 crore as compared to Rs 707 crore in Q2FY22 and Rs 5,831 crore in Q3FY21. Bank's provision coverage, as a proportion of Gross NPAs stood at 72%, as compared to 75%...

Fresh slippages fell to INR41.47b (v/s INR54.6b in 2QFY22), while higher recoveries and upgrades at IN32.88b and write-offs of INR17.07b enabled a 36bp/17bp QoQ decline in GNPA/NNPA ratio. Net NPA fell below 1% to 0.91%. We expect AXSB to deliver an FY24E RoA/RoE of 1.6%/16.1% in...