Downgrade Axis Bank to Accumulate - Kotak

We see moderate upside from current levels; hence, we are downgrading the stock.

- Axis bank has moved up sharply during last 15 days (19.6%), as against 4.1% rise in SENSEX and 12.3% rise in BANKEX, on the back of government's recent big-ticket announcements along with 25bps cut in CRR by RBI (although we see this as only a token gesture!!).

- As a part of conscious strategy, Axis bank is growing its retail book visà-vis other segments to realign the loan mix which has lower share of retail loans. This segment is also witnessing increased competition from other players in light of poor credit off-take in wholesale segment. Hence, we foresee some pressure on the asset yields due to change in the competitive landscape.

- Although in percentage terms, asset quality remained largely stable with gross and net NPAs at 1.06% and 0.31%, respectively, at the end of Q1FY13, this could surprise negatively in the future due to its high exposure to infrastructure and other stressed sectors.

- At the current market price of Rs.1136, the stock is trading at 9.5x its FY13E earnings and 1.8x its FY13E ABV. We are downgrading the stock to ACCUMULATE from BUY earlier on the back of moderate upside left from the current level. We maintain our TP at Rs.1230 based on P/ABV of 2.0x its FY13E adjusted book value and advise our clients to look for better entry opportunity in the stock.

Source : Equity Bulls

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