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BROKING | DEPOSITORY | DISTRIBUTION | FINANCIAL ADVISORY|MERCHANT BANKING
AXIS BANK LTD
Stock Coverage
www.hemsecurities.com
Date 01st Mar 2019
BSE Code 532215
NSE Code AXIS BANK
Market Cap (Rs Cr) 180765.50
52 week High/Low 734.35/477.50
Industry Bank-Private
Face Value Rs 2/Share
Shares O/S (In No) 257.10 Cr
EPS * 3.82
Book Value* 259.43
P/B 2.71
*Note: On TTM basis
Shareholding Pattern as on Dec’ 2018
Research Analyst : Astha Jain
Axis Bank is India’s third largest private sector bank, offering a wide
spectrum of financial products and services to customer segments
spanning retail, Small and Medium Enterprises (SMEs) and corporate
businesses. As on 31st December 2018, the Bank had a network of 3,964
domestic branches and extension counters situated in 2,321 centres
compared to 3,589 domestic branches and extension counters situated in
2,082 centres last year. As on 31st December 2018, the Bank had 12,705
ATMs and 3,548 cash recyclers spread across the country.. It also has 11
overseas offices with branches in Singapore, Hong Kong, Dubai (at the
DIFC), Shanghai and Colombo; an offshore banking unit at International
Financial Service Centre (IFSC), Gujarat International Finance Tec-City
(GIFT City), Gandhinagar; representative offices in Dubai, Abu Dhabi,
Sharjah and Dhaka; and an overseas subsidiary in London, UK.
Robust Financial Performance: During Q3FY19 bank has witnessed
whopping jump of more than 130 % in its bottomline at Rs 1680.85 Cr on
YoY basis. The Bank’s operating Profit for the same quarter grew 43% YOY
to Rs 5,525 crore. The Bank’s Net Interest Income (NII) grew 18% YOY to
Rs 5,604 crores during Q3FY19. Net interest margin for Q3FY19 stood at
3.47%, Gross slippages in the quarter were Rs 3,746 crores, or 0.70% of
Gross Customer Assets, compared to Rs 4,428 crores in Q3FY18. Net
Slippages in the quarter were Rs 2,124 crores, or 0.40% of Gross customer
assets. Net Slippages in Retail are down 18% from Q3 FY18.
Strong ROE guidance with focus on three vectors: Bank has guided to
deliver 18% ROE on a sustainable basis by focusing on three vectors
Growth, Profitability and Sustainability. On growth vector . bank’s focus
over the next 3 years would be to improve deposit growth materially to
fund its strong loan growth aspirations, establish leadership in payments
and digital capabilities, and to materially scale up its subsidiaries. On
profitability vector, bank intend to make all significant portfolio mix
choices based on an assessment of Risk Adjusted Return on Capital, or
RAROC. Bank also intend to focus on improving its cost efficiency &
reducing the credit costs sustainably below its long-term averages. On
Sustainability vector, bank is strengthening its technology, analytics,
operations or process; & investing in its risk management architecture.
Valuation
The bank is currently trading at 2.71x of TTM book value of Rs 259.43. On the back of strong growth strategy with robust financial performance in Q3FY19 , bank has guided for healthy ROE going forward .All these infuse optimism in bright future prospects of bank. Hence , we recommend “Buy” on the stock with price target of Rs 830 (appreciation of almost 18%) for long term investment.
For Private Circulation Only HEM RESEARCH
BUY CMP 703.10 TARGET 830 LONG TERM INVESTMENT
Promoter24%
FII47%
Others29%
AXIS BANK LTD
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Bank’s Subsidiaries
Axis Finance: One of the fastest growing NBFCs with product offerings like structured financibg,
special situations funding etc.
Axis Mutual Fund: Among the fastest growing AMC since launch in ’09 & has more than 3.6 mn
client folios. It has market share of 3.46 % as at end of Dec’18.
Axis Direct : It is among the fastest growing equity broker in India & is among top 3 brokers in India
with cumulative client base of 2.02 mn.
Axis Capital: It is leading player in investment banking & ranked no 1 ECM banker executed equity
deals worth over Rs 1000 bn in last 5years.
Freecharge: It is being positioned by the Bank as an engine that generates a large base of new to
bank customers that are young and digitally native.
A Treds : Axis Bank is one of the three entities allowed by RBI to set up the Trade Receivables Discounting System (TReDS), an electronic platform for facilitating cash flows for MSMEs TReDS is an electronic platform that connects MSME sellers with buyers and financiers Bank’s digital invoice discounting platform ‘Invoicemart’ continues to be India’s leading TReDS platform with market share of nearly 40%. There are 18Financiers on-boarded on the platform.
For Private Circulation Only HEM RESEARCH
\
North23%
East19%West
20%
South24%
Central14%
Branch Distribution Area Wise
North23%
East19%
West20%
South24%
Central14%
Branch Distribution Region Wise
Metro29%
Urban23%
Semi-Urban31%
Rural17%
Branch Distribution Area Wise
9381
100 104114
76
100
85
0
20
40
60
80
100
120
Q4FY17 Q1FY18 Q2FY18 Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19
New Branches Opened
AXIS BANK LTD
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Strong loan growth The Bank’s strong deposit growth has enabled healthy loan growth. Domestic loan growth for the Q3FY19 stood at 18% on YOY basis. The international loan book de-grew by 19%.Retail continued to be the key growth driver – growing at 20% YOY, with continued diversification in portfolio mix towards products offering higher risk adjusted returns. SME lending grew by 13% YOY. Term loans and working capital loans grew by 6% and 16% YOY, respectively. Share of working capital to overall SME loan book currently stands at 79%. The focus of bank remains on building a highly rated, profitable SME book. Presently, 86% of non NPA outstanding exposure is to clients rated SME3 or better. In the Corporate Bank, domestic loan growth stood at 13%, and the international book de-grew 23% YOY. Within the Corporate book, bank’s mix has been shifting steadily towards better rated clients,
For Private Circulation only HEM RESEARCH
54884
58742 56983
60262
6223827%
19% 19%
14%
13%
0%
5%
10%
15%
20%
25%
30%
50000
52000
54000
56000
58000
60000
62000
64000
SME LOAN
SME Loan (In Cr) YOY Growth
15% 15%
8% 9% 13%
3%4%
2%
-23%
-23%-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
Q3FY18 Q4FY18 Q1FY19 Q2FY19 Q3FY19
Trend in domestic & overseas corporate loan
growth (YoY)
Domestic Advances
Overseas Advance
0
20
40
60
80
100
Mar'13 Mar'14 Mar'15 Mar'16 Mar'17 Mar'18 Dec'18
2738 40 41 45 47 49
1515 15 13 13 13 13
5746 45 46 42 40 38
Loan Book % wise Segment Contribution Along with Total Loan Book Size
in Cr
Retail SME Corporate
196966 230067 281083 338774 373069 439650 475104
AXIS BANK LTD
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Improving Asset quality
During Q3FY19 ,slippages continue to remain at moderate levels. Gross slippages in the quarter were Rs 3,746 crores, or 0.70% of Gross Customer Assets, compared to Rs 4,428 crores in Q3FY18 and Rs 2,777 crores in Q2FY19. Slippages from the corporate segment were Rs 1,887 crores. Corporate Slippages came predominantly from bank’s previously disclosed stress book. Of all corporate slippages in the quarter, 98% came from the BB & Below pool. Net Slippages in the quarter were Rs 2,124 crores, or 0.40% of Gross customer assets. Of this, Rs 1,394 crores came from Corporate, Rs 237 crores from SME and Rs 493 crores from Retail and Agri segments. Net Slippages in Retail are down 18% from Q3 FY18. In the Agri business, net slippages are down 30% compared to Q3 FY18. The Bank has received an indicative list from RBI relating to asset quality divergence for the fiscal year ending 31st March 2018. The Bank has been asked to classify 2 accounts as NPA. These accounts had a total outstanding amount of Rs 225 crores which constitutes less than 0.7% of last year’s slippages of the Bank. Both of these accounts have already been downgraded by the Bank in Q1 FY19. In addition, the Bank has been asked to make additional provisions of Rs 99.7 crores on 2 accounts already NPA as of March 2018. This provision has been incorporated in Q3 financials. NPA ratios for the Bank improved sequentially, with GNPA and Net NPA reducing by 21 bps and 18 bps respectively. Bank ended the quarter with a GNPA ratio of 5.75% and Net NPA ratio of 2.36%. From Q2 to Q3, there is a net reduction of 14% in the standard BB & Below book. Bank’s BB & Below book now stands at Rs 7,645 crores, or 1.4% of gross customer assets, down from 7.3% at peak.
1.061.22 1.34
1.67
5.04
6.77 6.525.96 5.75
0.32 0.4 0.440.7
2.11
3.43.09
2.54 2.36
0
2
4
6
8
Mar'13 Mar'14 Mar'15 Mar'16 Mar'17 Mar'18 June'18 Sept'18 Dec'18
GNPA & NNPA Ratio
GNPA% NNPA%
60%64% 65% 65%
60%66% 65% 69%
73%75%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Sept'16 Dec'16 Mar'17 June'17 Sept'17 Dec'17 Mar'18 June'18 Sept'18 Dec'18
Provision Coverage Ratio
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AXIS BANK LTD
Consolidated P&L A/c
Rs Cr
Particulars FY16 FY17 FY18 FY19E FY20E
Total Income 51364.23 57596.70 58476.67 68642.42 79255.44
Growth % 12.13 1.53 17.38 15.46
Total Exp 34955.60 39514.98 42392.05 49125.45 56654.83
Pre Prov Profit 16408.63 18081.72 16084.62 19516.97 22600.61
Growth % -- 10.20 (11.04) 21.34 15.80
Provisions 3718.71 12127.91 15518.73 12414.98 8690.49
PBT 12689.92 5953.81 565.89 7101.99 13910.12
Exceptional 0.00 0.00 0.00 0.00 0.00
PBT After Excep 12689.92 5953.81 565.89 7101.99 13910.12
Tax 4332.33 1986.7 101.86 2130.60 4173.04
PAT 8357.59 3967.11 464.03 4971.39 9737.08
Minority Interest & Share Of Associate
(7.92) (14.00) (8.21) (8.21) (8.21)
Adjusted PAT 8349.67 3953.11 455.82 4963.18 9728.87
Growth % --- (52.66) (88.47) 988.85 96.02
Ratios
Particulars FY16 FY17 FY18 FY19E FY20E
NIM% 3.37 3.12 2.89 3.18 3.36
GNPA % 1.76 5.58 7.61 6.00 5.00
NNPA% 0.74 2.33 3.83 2.76 2.21
ROA % 1.65 0.68 0.07 0.65 1.09
ROE % 16.95 7.18 .76 7.43 13.13
Credit Deposit Ratio %
96.19 91.85 98.72 98.72 98.72
Prov Cover Ratio %
55.74 57.35 50.68 55.51 56.99
CASA Ratio % 47.25 51.22 53.48 55.77 58.16
Cost To Inc Ratio 39.27 41.30 47.90 47.11 47.13
EPS 32.48 15.38 1.77 19.31 37.84
Book Value 208.48 219.54 250.02 269.32 307.16
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AXIS BANK LTD
Consolidated Balance Sheet
Rs Cr
Particulars FY16 FY17 FY18 FY19E FY20E
Capital & Liabilities
Capital 476.57 479.01 513.31 513.31 513.31
Reserves & Surplus
53082.19 55901.34 63694.10 68657.28 78386.16
Minority Interest 39.05 61.31 69.51 69.51 69.51
Deposits 358302.19 414982.68 455657.76 533119.58 623749.91
Borrowings 113847.73 112454.76 155767.09 182247.49 213229.56
Other Liabilities & Provisions
20638.88 27582.92 28001.59 32761.86 38331.38
Total 546386.60 611462.00 703703.00 817369.03 954279.83
Assets
Cash & Balances with RBI
22361.16 30857.95 35481.06 41512.84 48570.02
Bal With Bank & money at Call & Short Notice
11341.65 20108.17 8429.75 9862.81 11539.48
Investments 131398.64 129018.35 153036.71 179052.95 209491.95
Advances 344663.00 381164.67 449843.65 526317.07 615790.97
Fixed Assets 3573.76 3810.24 4048.82 4737.12 5542.43
Other Assets 33048.08 46502.64 52863.38 55886.24 63344.97
Total 546386.30 611462.00 703703.00 817369.03 954279.82
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AXIS BANK LTD
Standalone Quarterly Financial Highlights
Rs Cr Rs. Crore
Particulars Q3FY19 Q3FY18 Q2FY19 YoY% QoQ%
Total Income 18130.42 14314.63 15959.37 26.66 13.60
Total Expenses 12605.77 10460.83 11865.37 20.50 6.24
Pre Provision Profit 5524.65 3853.80 4094.00 43.36 34.95
Provision 3054.51 2811.04 2927.38 8.66 4.34
PBT 2470.14 1042.76 1166.62 136.88 111.73
Tax 789.29 316.32 377.01 149.52 109.36
PAT 1680.85 726.44 789.61 131.38 112.87
EPS 6.54 2.83 3.07 130.86 113.03
NIM% 3.47 3.60 3.59 (3.61) (3.34)
CAR % 15.81 17.50 16.17 (9.66) (2.23)
GNPA % 5.75 5.28 5.96 8.90 (3.52)
NNPA% 2.36 2.56 2.54 (7.81) (7.09)
Past Price movement of the stock
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13 20 27 3 10
September
17 24 1 8
October
15 22 29 5 12
November
19 26 3 10
December
17 24 31
2019
7 14 21 28 4
February
11 18 25 4
March
11 18
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SENSEX (36,018.49, 36,140.67, 35,952.41, 36,063.81, +196.367), AXIS BANK (713.950, 715.000, 700.000, 703.100, -6.25000)
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HEM SECURITIES LIMITED
MEMBER-BSE,CDSL,SEBI REGISTERED CATEGORY I MERCHANT BANKER
Sebi Registration No For Research Analyst: INH100002250
MUMBAI OFFICE: 904, A WING. 9TH FLOOR, NAMAN MIDTOWN, SENAPATI BAPAT MARG, ELPHINSTONE ROAD, LOWER PAREL ,MUMBAI -400013 PHONE- 0091 22 49060000 FAX- 0091 22 2262 5991
JAIPUR OFFICE: 203-204, JAIPUR TOWERS, M I ROAD, JAIPUR-302001 PHONE- 0091 141 405 1000 FAX- 0091 141 510 1757
GROUP COMPANIES
HEM FINLEASE PRIVATE LIMITED
MEMBER-NSE
HEM MULTI COMMODITIES PRIVATE LIMITED
MEMBER-NCDEX, MCX
HEM FINANCIAL SERVICES LIMITED
NBFC REGISTERED WITH RBI
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Disclosure of Interest Statement
1. Analyst Ownership of the stock No
2. Hem & its group companies ownership of stock Yes
3. Hem & its group companies director ownership of stock No
4. Broking relationship with the company covered No