Axis Bank shares dip slightly today after strong Q2 gains. Good time to buy?

Despite a strong Q2, analysts are divided on Axis Bank's future prospects. Many brokerages have adjusted their target prices, reflecting a cautious outlook on the bank's near-term growth trajectory.

In Short

• Axis Bank shares down slightly in early trade
• Brokerages shared mixed reviews on stock after Q2 results
• Private lender beat expectations in the second quarter

Axis Bank shares saw a marginal decline in early trade on Monday, dropping by 0.23% to Rs 1,192.45 on the Bombay Stock Exchange (BSE) at 11:42 AM. This slight dip comes after the stock surged nearly 6% in the previous session following the release of its Q2 FY25 results, which showcased a robust 18% year-on-year (YoY) rise in net profit to Rs 6,918 crore, compared to Rs 5,864 crore in the same period last year.

The bank's Q2 FY25 results exceeded market expectations in several areas. Net Interest Income (NII) grew by 9% YoY to Rs 13,483 crore, while the bank’s Net Interest Margin (NIM) stood at 3.99%. Operating profit increased by 24% YoY and 6% quarter-on-quarter (QoQ) to Rs 10,712 crore. Core operating profit, excluding trading income, saw a 10% YoY rise to Rs 9,601 crore.

Commenting on the results, Axis Bank's MD & CEO Amitabh Chaudhry highlighted the balance between digital expansion and physical branch openings. In Q2, the bank opened 150 new branches across both urban and rural areas, reinforcing its commitment to customer outreach.

WHAT BROKERAGES SAY

Despite a strong Q2, analysts are divided on Axis Bank's future prospects. Many brokerages have adjusted their target prices, reflecting a cautious outlook on the bank's near-term growth trajectory.

Bernstein maintained an ‘Outperform’ rating with a target price of Rs 1,250. While the results highlighted improvements in credit costs and operating expenses, the firm expressed concerns about weak loan growth and overall asset quality. Investec also maintained a ‘Buy’ rating but reduced its target price to Rs 1,298 from Rs 1,340, citing one-off factors driving the positive results. The brokerage noted that growth is expected to pick up gradually, though short-term momentum may be subdued.

Macquarie reiterated its ‘Outperform’ rating with a higher target price of Rs 1,400. However, it flagged concerns about Axis Bank’s loan and deposit growth, noting that tax write-backs and treasury gains buoyed the positive performance.

Nomura raised its target price to Rs 1,380 from Rs 1,370, while maintaining a ‘Buy’ rating. It described Axis Bank’s Q2 performance as steady, despite lower expectations for loan and deposit growth in the upcoming quarter.

OTHER BROKERAGES CAUTIOUS

Several other brokerages have expressed more tempered expectations for Axis Bank's near-term growth. IIFL lowered its target price to Rs 1,360 from Rs 1,380, citing slower NII growth and elevated credit costs due to buffer provisions. However, the firm maintained its ‘Buy’ rating, anticipating that Axis Bank's valuation gap with peers like ICICI and Kotak Mahindra Bank would narrow over time.

Citi Research maintained its ‘Neutral’ rating, reducing its target price to Rs 1,290. The brokerage highlighted lower growth forecasts and concerns over the bank’s muted earnings per share (EPS) projections for the coming quarters.

Motilal Oswal Financial Services took a cautious stance, maintaining its neutral rating with a target price of Rs 1,225. The brokerage raised its FY25 earnings estimates but flagged concerns about Axis Bank’s high loan-to-deposit ratio of 92%, which may limit credit growth in the near term. Motilal Oswal also noted that continued re-pricing of deposits could keep NIMs under pressure, further constraining profitability.

LONG-TERM BET?

Despite mixed reviews, some analysts see long-term value in Axis Bank. Macquarie pointed out the bank’s strong balance sheet and contingent buffers, while Motilal Oswal highlighted favorable risk-reward dynamics over the medium term. Nomura, Macquarie, and others are optimistic that the bank’s focus on improving asset quality and cost management will yield results in the long run.

In summary, while Axis Bank’s Q2 FY25 results showcased resilience, the outlook for the coming quarters remains cautious. With challenges such as elevated credit costs and weak loan growth, investors are advised to weigh the bank’s short-term hurdles against its long-term growth potential.

For those looking to invest, the stock offers a mixed bag of risks and rewards, with some analysts advising a hold or buy for those with a long-term perspective.

(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)