ICICI Direct’s research report on Axis Bank
Axis Bank’s top management provided deep insights into the bank’s strategy to achieve aspired RoE of 18% in the medium term (FY22E). New MD & CEO, Amitabh Chaudhary, showcased their Growth- Profitability- Sustainability (G-P-S) strategy. Drivers to lead to uptick in RoE are; 1) Risk normalisation (controlled asset quality and credit cost), 2) business mix optimisation (RAROC based portfolio choice), 3) operating efficiency (cost to asset ratio to trim below 2%). Our RoE estimates, without factoring in capital infusion, are at ~15.4% in FY21E. Hence, RoE target of 18% by FY22E, along with capital infusion, seems a bit difficult.
Outlook
We remain positive on the bank and upgrade our target price to Rs 825 (earlier Rs 790) valuing core bank at 2.6x FY21E ABV. We maintain BUY rating.
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