As Axis Bank rises after exceeding estimates, should you buy or sell stock

Axis Bank share price touched a 52-week high of Rs 873.90, rising nearly six percent in early trade on October 21, a day after the private sector lender reported its September quarter earnings.

Axis Bank on October 20 posted a 70 percent year-on-year rise in its net profit for the September quarter at Rs 5,329.77, beating estimates. Sequentially, net profit grew 29 percent.

Net interest income went up 31 percent year on year to Rs 10,360.3 crore. Net interest margin was at 3.96 percent, clocking a year on year rise of 57 basis points and sequential increase of 36 bps.Here is what brokerages have to say about the stock and company after June quarter earnings:Axis Bank delivered stellar performance in the September quarter, driven by sharp margin expansion and a significant decline in provisions along with improving trends in cost metrics.

Business growth recovered in the quarter under review after a sequential decline in the previous quarter. Asset quality continues to improve, aided by moderation in slippages and healthy recoveries, and upgrades. Restructured book moderated further while higher provisioning buffer provides comfort.

Buoyed by an exemplary performance, we revise profit after tax for FY23/24 by 17/11 percent respectively. We estimate Axis Bank to deliver FY24 return on assets/equity (RoA/RoE) of 1.8/18.1 percent respectively. We reiterate our buy rating with a target price of Rs 975 (2.0x FY24 adjusted book value)

Sharekhan

The bank is looking for a sustainable growth path in terms of loan growth, led by retail, SME, and mid-corporate segments in a granular manner along with a focus on mobilisation of low-cost granular liability and higher spending on tech. New digital product initiatives, both in asset and liability segments, are growing well, as reflected in strong acquisition growth.

With high provision coverage ratio and a strong balance sheet, the bank can absorb shocks from any unanticipated future risk. We believe its valuations are reasonable, given structural improvement visible in the franchise, and the bank provides an attractive risk-reward ratio.

LKP Research

We value the standalone bank at a price to book value of 2.1x FY24 adjusted book value per share of Rs 478 and arrive at a price target of Rs 1,005. We recommend buy with a potential upside of 22 percent from current levels.

Morgan Stanley

We have maintained ‘overweight’ call on the stock and raised the target to Rs 1,150.Deposit growth is muted, but expect acceleration by the second half of the fiscal.We expect the stock to re-rate amid highr margin/better operating leverage.

JPMorgan

We have upgraded the rating of Axis Bank to overweight and raised the target price to Rs 990 from Rs 780 per share.

A 36 basis point sequential improvement in net interest margin is a key positive surprise and margin improvement drives 16 percent increase in FY23/24 earnings per share.Valuations are attractive, and currently 25 percent below peer group.

Goldman Sachs

We keep a buy rating on Axis Bank with a target of Rs 1,053 per share. Gains are likely to sustain and push up pre-provision operating profit-return on asset.

The September quarter should drive earnings upgrade and re-rate valuation multiple.At 09:17 hrs Axis Bank was quoting at Rs 856.35, up Rs 30.15, or 3.65 percent on the BSE.