Axis Bank share falls 3% despite robust Q1; should you buy, hold, or sell?

Shares of Axis Bank tumbled over 3% in intraday trade on Tuesday, in sync with the broader market, as investors resorted to profit booking after the private bank released its quarterly earnings report. Most of the analysts remain bullish on Axis Bank after its net profit nearly doubled on yearly basis, while it remained flat sequentially.

Private lender Axis Bank on Monday reported a 91% year-on-year (y-o-y) jump in net profit to ₹4,125 crore in the quarter ended June 2022, compared to ₹2,160 crore in the same period last year. The net interest income (NII) rose 21% YoY to ₹9,384 crore in the first quarter, while net interest margin (NIM) for the quarter stood at 3.6%, up 14 basis points on yearly basis.

The lender made specific loan loss provisions worth ₹777 crore in the April-June quarter of 2022, while cumulative provisions stood at ₹11,830 crore. On the asset quality front, the bank’s gross non-performing asset (NPA) and net NPA levels improved to 2.76% and 0.64%, respectively, as against 2.82% and 0.73% as on March 31, 2022.

Post Q1 results, the share price of Axis Bank declined as much as 3.6% to hit an intraday low of ₹702.15 on the BSE. Finally, the stock settled at ₹706.35, down 3% against the previous closing price of ₹728.20. The stock hit its 52-week high of ₹866.60 on October 25, 2021, and 52-week low of ₹618.10 on June 23, 2022. In comparision, the BSE benchmark Sensex closed at 55,268 levels, down 498 points.

Technically, the stock is moving in a ‘mildly bearish’ range, trading higher than 5-day, 20-day, 50-day, and 100-day moving averages, but lower than 200-day moving averages. The banking heavyweight has gained 1% in a week, 11.5% in the past one month, and more than 4% since the beginning of the calendar year 2022. In the last one year, the stock has delivered a negative return of 6.5%, while it has fallen 3% over a three-year period.

Analysts’ view on Q1 results:

Most of the analysts have maintained a “buy” call on Axis Bank with a revised target price. According to domestic brokerage ICICI Securities, Axis Bank’s June quarter performance focused on earnings delivery and continued franchise investment, post balance sheet strengthening phase. The strong growth in fee income more than offsets treasury loss of ₹670 crore, while balance sheet expansion moderated on q-o-q basis, the brokerage said in its report. The agency has maintained a “buy” call on the stock with an unchanged target price of ₹1,050.

Motilal Oswal has retained a "buy" call on the stock with a target price of ₹875 per share, saying that the business growth was muted, but the bank managed to moderate slippages and reduce provisions.

Global brokerage Jefferies has also maintained a “buy” rating on the stock, but it cut the target price to ₹1,010, from ₹1,050 estimated earlier.

Morgan Stanley also kept an overweight rating on Axis Bank with a target of ₹910 per share, citing that profit beat estimates on the back of higher-than-expected revenue.

Another brokerage, Edelweiss reiterated its “buy” call on the stock, with an upgraded target price of ₹970, from ₹920 projected earlier.