MUMBAI: Shares of Axis Bank hit a new high of Rs 710 apiece, rising 3 per cent on Thursday, thereby gaining 8 per cent in past three trading days on the BSE, after private sector lender posted a healthy set of numbers for the quarter ended December 31 (Q3FY19). The stock has surpassed its previous high of Rs 703 recorded on January 30, 2019, on BSE in the intra-day trade.
Axis Bank had reported an over two-fold jump in net profit at Rs 1,681 crore in Q3FY19 on the back of strong growth in non-core income due to recoveries and stake sales. It had a profit of Rs 726 crore in December 2017 quarter (Q3FY18).
Net interest income (NII) grew 18 per cent year-on-year to Rs 5,604 crore during Q3FY19 from Rs 4,732 crore in Q3FY18. The bank’s assets quality during the quarter under review improved sequentially with gross non-performing assets (NPA) and net NPA levels were 5.75 per cent and 2.36 per cent respectively, as against 5.96 per cent and 2.54 per cent respectively as on September 30, 2018 (Q2FY19).
Analysts Reliance Securities believe that the bank is closer to the end of its stress loan recognition cycle, which along with improving PCR clearly indicates sharp moderation in credit cost in FY20E. The contingent provisioning on residual stressed loans is also expected to limit incremental provisions on these.
“Looking ahead, we expect the Bank to deliver sustained improvement in operating metrics led by dwindling headwinds on asset quality, improvement in capital efficiency and higher balance sheet growth. Consequently, ROE is expected to improve to 14 per cent for FY20E against 7.5 per cent for FY19E. Sustained progress in the management’s stated strategy and capital allocation to subsidiaries will be watched out for,” the brokerage firm said in result update with ‘buy’ rating on the stock and target price of Rs 750 per share.
Infosys rose 3.5 per cent to Rs 751, to trade close to its record high price of Rs 755 touched on October 1, 2018, on the BSE in the intra-day deal. The stock of information technology (IT) services Company was the largest gainer among S&P BSE Sensex and Nifty 50 indices at 01:17 pm.
Infosys has outperformed the market by gaining 16 per cent from its recent low of Rs 645 on December 26, 2018. In comparison, the benchmark index was up 1 per cent during the period.
India's second largest IT services firm increased FY19 constant currency (CC) revenue growth guidance to 8.5-9 per cent from 6-8 per cent earlier. The company has maintained its EBIT (earnings before interest and tax) margin guidance range at 22-24 per cent.
Infosys, on January 11, 2019, announced a special dividend of Rs 4 per share. The company announced buyback under the open market route of Rs 8,260 crore at a maximum price of Rs 800 per share.
Driven by Infosys’s robust show on revenue growth, deal wins and upgraded guidance, the brokerage firm Motilal Oswal Securities increase FY19/20/21 revenue estimate by 0.6/1.1/2.0 per cent. However, given the cost challenges, the brokerage firm trim FY19/20/21 EBIT (earnings before interest and tax) margin estimate by 42/62/44bp to 23.3/22.8/23 per cent.
“Infosys’s impressive catch up on revenue growth with industry leaders is encouraging, while challenges on the margins are secular.Q3FY19 performance will make a case for the narrowing of the valuation gap with leading peers such as Tata Consultancy Services (TCS), in line with our thesis,” the brokerage firm said in result update with ‘buy’ rating on the stock and target price of Rs 800 per share.
“Infosys appears to be settling down well with new management in place. The demand environment that we see improving in FY19 provides a comfortable context for the new management team to get down to work. In FY19, most verticals for Infosys, especially the key verticals (such BFSI, retail and manufacturing), seem to be in better shape. In fact, Infosys is confident of a better show in Banking & Financial Services (BFSI) in FY19 v/s FY18 citing increased digital spending and further penetration into regional banks,” analysts at JP Morgan said in India IT Services report dated January 16, 2019.
Despite the confidence exuded by TCS/Infosys post-earnings (Dec-18), we see a more challenging demand environment for India IT in 2019 affecting sequential growth & valuations, it added. The brokerage firm has ‘overweight’ rating on Infosys with a target price of Rs 750 per share.