Axis Bank share price rises despite Q2 loss; should you buy or sell stock?

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Published: October 23, 2019 1:11:34 PM

Even as Axis Bank reported loss of Rs 112 crore, hurt by one-off DTA (deferred tax assets), in the second quarter of FY20, the shares of the private lender gained as much as 2.5 per cent to hit the day’s high at Rs 730 on BSE.

Shares of Axis Bank on Tuesday closed 0.49 per cent higher at Rs 712.70 on the BSE.In the corresponding period last year, the private bank Axis Bank posted a net profit of Rs 790 crore.

Even as Axis Bank reported loss of Rs 112 crore, hurt by one-off DTA (deferred tax assets), in the second quarter of FY20,  the shares of the private lender gained as much as 2.5 per cent to hit the day’s high at Rs 730 on BSE. The scrip is trading at Rs 719.80, up 7.10, or 1 per cent at the time of reporting. In the corresponding period last year, the private bank posted a net profit of Rs 790 crore. The profit before tax for Q2FY20 stood at Rs 2,433 crore, up 109 per cent on-year in the ongoing fiscal. The operating profit for Q2FY20 grew 45 per cent on-year to Rs 5,952 crore.

“We upgraded AXSB to ‘ACCUMULATE’ post Q1FY20 results with a PT of Rs730. Our rating reflects our still cautious view on the stock and the likelihood of continued high slippages, even if from known stress pool. We reiterate our view that while the bank is structurally improving, we do not see it crossing 15% RoE before FY22E,” IndiaNivesh Securities said in a report. Since it would take a long time for the targeted sustainable 18% RoE, it would be early to attribute a higher value multiple and therefore, the price target has been retained at Rs 730 with ‘ACCUMULATE’ rating, the brokerage added.

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“While we raise our estimates on slippages and credit costs, earnings for FY20E/21E are higher by 4%/10% driven by improving NIM outlook and better operating efficiency. With RoA/RoE at 1.4%/15% for FY21E, we revise our recommendation on the stock to BUY from HOLD with a revised Target Price of Rs800 (from Rs770 earlier), valuing the bank at 2.5x FY21E ABV,” Reliance Securities said in a report.

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