Recent stock broker recommendations

In a dynamic market scenario, many stocks find themselves on the radar of brokerages, whose analysts do a detailed analysis of past performance as well as gauge future potential. We track stocks that have been covered by brokerages over the last few weeks and what are the key highlights of each report and the reasons for choosing these stocks. This week we bring you highlights from two stocks covered by brokerage houses viz, Axis Bank and Phoenix Mill.

Axis Bank

The first new private bank to start operating in 1994 after the Government of India permitted new private banks to be created was Axis Bank, which was founded in 1993. It carries out cash and credit management services, retail banking, investment management and treasury services amongst others.

The Bank is dedicated to using the finest industry processes globally in order to achieve excellence and has strengths in both retail and corporate banking. Axis Bank is one of the three organisations that the RBI has given permission to establish the Trade Receivables Discounting System (TReDS), an electronic platform that facilitates financial flows for MSMEs.

Broker’s Call

CMP today 08 July 22	Rs 660
Broker House	ICICI Securities	Sharekhan	Venture
Report date	02-July-22	20-June-22	02-May-22
CMP on Report date	645	636	671
Target (INR)	1050	940	901.1
Upside Potential	+62%	+47%	+34.3%
Gain/Loss% since Report	+2.3%	+6.6%	-1.6%
Time Period	12 Months	12 Months	24 Months

ICICI Securities’ View on Axis Bank-

● Incremental insights from annual report:

The transition and integration process for Citi’s consumer business in India is moving along smoothly and is still on schedule. The transaction is anticipated to close in Q4 of FY23, and full integration will follow in 18 months. 19 significant transformative initiatives are moving forward with the GPS strategy implementation. Focused industries including mid-corporate, commercial banking (CBG), and MNC had YoY growth of 45%, 26%, and 49%, respectively. New to bank SME business book increased by 53%, and CBG segment was used to source roughly 20% of premium
Burgundy Private and Burgundy accounts.

 

● Income Increase:

The bank’s fee income from retail banking was 64 percent (up from 62 percent in FY21). Granular fees for third-party distribution at Axis Bank increased by 29 percent year over year, with costs associated with investments and insurance increasing by 48 and 22 percent, respectively. Retail card fees made up 22% and retail non-card fees made up 42% of the fee income, respectively.

Sharekhan’ View on Axis Bank

● Improved NIM over the medium

The start of the rate hike cycle will help floating rate loans to reprice faster, while liabilities are expected to reprice with lag and with less quantum. They also expect improvement in the net interest margin over the medium term, which will be driven by a loan growth skewed towards higher yield segment; b. improved low-cost granular deposit base; and c. reduced share of low yielding RIDF bonds (at 3.54% of total assets in FY2022, down from 4.75%). NIM would, however, only be slightly impacted by the CRR increase.

 

● Accelerated technological Investment

The bank keeps up a sizable investment in developing digital and cutting-edge IT capabilities. The bank is also spending money on necessary talent. With a greater emphasis on cutting-edge technical talents over the past two years, the bank’s IT staff has risen in size by 75%. Nearly the previous two years, the total amount spent on technology has increased by over two times, weighing down on profitability and core PPOP growth.

Ventura’ View on Axis Bank

● Between FY21 and FY24E, they anticipate a 12.5 percent CAGR in loan growth. Between FY18 and FY21, Axis’ loan book grew at a 12.4 percent CAGR. Given the assumption of calibrated lending, They have not forecast any acceleration in loan book growth over the historical rate. They expect the loan book to grow at a 12.5% CAGR over FY21-24E to INR 8,87,733.8 cr driven by: 14.9% CAGR in retail loans, 15.8% CAGR in SME loans, 7.4% CAGR in Corporate Loans

 

● They expect the credit to total deposits ratio to stay at 70% with the overall share of CASA expected to touch 43.0% of total deposits in FY24. They expect a mix of customer deposits and borrowings to stay at ~81% (as against 83% seen in FY21).

Phoenix Mill

Phoenix Mills Ltd. operates and manages malls in India as well as builds commercial and residential real estate and operates hotels. The Company has a portfolio made up of over 17.5 million square feet of retail, residential, commercial, and hotel properties distributed over more than 100 acres of land.

Phoenix Mills Ltd. was established in 1905. In 2001, they debuted the “Big Bazaar,” India’s first hypermarket idea, on High Street Phoenix. The company began their operations as a textile manufacturing company on 17.3 acres of land at Lower Parel in Mumbai, which is now converted to a mall, hotel and other mixed use development.

Broker’s Call

CMP today 08 July 22	Rs 1200
Broker House	ICICI Securities	HDFC Securities
Report date	07-July-22	25-May-22
CMP on Report date	1184	1101
Target (INR)	1392	1364
Upside Potential	+17.5%	+23.8%
Gain/Loss% since Report	+1.3%	+8.9%
Time Period	12 Months	12 Months

ICICI Securities’ View on Phoenix Mills-

● Rental Income CAGR of 14% over FY20-25E

By FY26E, Phoenix will have almost 13 million square feet of operational mall space, representing an estimated 14 % CAGR in rental income ). They anticipate Phoenix Mill to see a 14% CAGR in rental income (ex-new Kolkata asset) from FY20 to FY25, translating to Rs19.5 billion in rental income in FY25E compared to around Rs10 billion in FY20. Phoenix’s share of the Rs19.5bn in gross rental income in FY25E is 76%, or Rs14.8bn.

 

● Rental Collections see further QoQ traction

Additional QoQ growth is shown in rental collections: According to the firm, 95% of retailers returned to the pre-Covid minimum guarantee rents as of January 22, resulting in Q4FY22 retail EBITDA of Rs2.5 billion (or 96% of pre-Covid levels) and FY22 retail EBITDA of Rs8.0 billion (72% of pre-Covid levels). Retail rental collections (including CAM) climbed by 10% QoQ to Rs5.3 billion in Q1FY23, while Phoenix Palladium added 0.15 million square feet of new gross leasable area during the same period.

 

HDFC Securities’ View on Phoenix Mills

● Robust Liquidity Position

Consolidated gross debt was INR 43.8 billion, up from INR 43 billion as of December 21. The rise was brought on by the repayment of construction debt for the malls in Ahmedabad and Indore. The average cost of debt decreased from 7.61 percent in December 21 to 7.30 percent on a quarterly basis. With an unused OD of INR 6.2 billion, the group’s liquidity was at INR 25 billion. A further 30% of the debt has to be refinanced, leaving a total of 55% that has already been done.

 

About the Author

Ketan Sonalkar (SEBI Rgn No INA000011255)

Ketan Sonalkar is a certified SEBI registered investment advisor and head of research at Univest. He is one of the finest financial trainers, with a track record of having trained more than 2000 people in offline and online models. He serves as a consultant advisor to leading fintech and financial data firms. He has over 15 years of working experience in the finance field. He runs Advisory Services for Direct Equities and Personal Finance Transformation.

Note – This channel is for educational and training purpose only & any stock mentioned here should not be taken as a tip/recommendation/advice

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