Brokerage house Prabhudas Lilladher has increased its target price for Axis Bank to Rs 1,600 following the bank's latest quarterly results. The update reflects strong loan growth across corporate and retail segments, even as the bank navigated temporary pressure on profit margins. Analysts noted that while operational expenses impacted short-term profitability, the steady improvement in asset quality remains a key indicator of long-term stability for investors.
Brokerage firm Prabhudas Lilladher has revised its outlook on Axis Bank, setting a target price of Rs 1,600 per share. This update follows the bank’s recent second-quarter results, which presented a mixed picture for investors. While the lender saw positive growth in its loan portfolio, it also faced challenges regarding operational costs and profit margins.
The bank reported a sequential loan growth of 5.3%, excluding certain adjustments. This growth was driven by demand across various segments, including corporate, small and medium enterprises (SME), and retail lending. This indicates that the core business of lending money remains robust, which is a positive sign for the bank's long-term revenue potential.
However, the financial results also highlighted some pressure points. The bank’s Net Interest Margin (NIM)—a key measure of the difference between interest earned on loans and interest paid on deposits—fell by 10 basis points quarter-on-quarter to 3.36%. Management attributed a significant portion of this decline to temporary volatility from FCNR(B) impacts. The bank expects this trend to reverse by the third quarter of the 2027 fiscal year. Additionally, the bank’s operating profit missed street estimates by about 6%, largely due to a one-time operational expense of Rs 5 billion.
Analysts at Prabhudas Lilladher have adjusted their valuation model to reflect these figures, rolling the valuation framework forward to the September 2028 core adjusted book value. This resulted in the revised price target, moving up from their previous estimate of Rs 1,550.
For investors, the contrast between margin pressure and asset quality is the primary area to monitor. While short-term operational expenses and margin fluctuations can affect quarterly earnings, the bank's focus on asset quality—or the ability of borrowers to repay loans—is often viewed as a stronger indicator of underlying business health. The brokerage noted that the bank’s sustained improvement in asset quality provides a level of stability against the current earnings volatility.
Looking ahead, the recovery of profit margins and the management of one-time operational costs will be important for investors to track. The bank has guided that the margin pressure caused by FCNR(B) impacts should normalize by the third quarter of fiscal year 2027. Investors will likely look for updates on whether these operating expenses remain contained and if the net interest margins begin to show the expected improvement in the upcoming quarters.