Goldman Sachs puts 'neutral' on Axis Bank

RESEARCH: GOLDMAN SACHS

RATING: NEUTRAL

CMP: Rs 1209

Goldman Sachs downgrades Axis Bank to `Neutral’ from `Buy’, as recent share performance has priced in steps taken by management and an economic recovery. The stock is currently trading at 16x FY11E P/E and 2.7x FY11E P/B, a 14% premium when compared to the P/B median from FY04.

While asset quality concerns are receding in general, concerns around some riskier and mid-sized exposures is likely to keep the stock range bound; Axis Bank has seen about 18% slippage from its restructured loan book. Goldman Sachs revises the EPS estimates by +3%/+2%/-1% for FY11E/FY12E/FY13E to factor in no further increase in CRR versus expectation of 50 bps and higher treasury gains partially offset by higher employee costs. Consequently, the 12-month target increases from Rs1,280 to Rs 1,320.