Buy Axis Bank Ltd., target Rs 675.0 : Bank of America Merrill Lynch

Bank of America Merrill Lynch has Buy call on Axis Bank Ltd. with a target price of Rs 675.0. The current market price of Axis Bank Ltd. is 579.85. Time period given by analyst is year, when Axis Bank Ltd. price can reach defined target. BoFAML values Axis using the growth-adjusted P/BV method (Gordon Model), with the following key assumptions: sustainable long-term ROE: 16%, Cost of equity at 12.25%, Sustainable growth rate: 8%, hence assigning 25% premium for franchise and management. Alternatively, PO is 15.6x our FY18E EPS for net profit CAGR of 18% in FY16-18. Downside risks are a sharp rise in NPLs leading to higher credit costs, MTM hits arising from the corporate investment book or the inability to grow