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Axis Bank: Good potential in the stock

Axis Bank is the third largest private sector bank in India. The Bank offers the entire spectrum of financial services to customer segments covering Large and Mid-Corporates, MSME, Agriculture and Retail Businesses. The Bank has about 4,594 domestic branches, apart from solid international network of branches.

According to Motilal Oswal Financial Services, Axis Bank delivered a weak operating performance in 2QFY22 that was characterized by margin weakness (7bp QoQ decline) and a muted trend in Core PPoP.

“However, lower provisions (Rs 17.3 billion) aided earnings which surpassed our estimate by 13%. Business growth was tepid and was pulled down by a 5% QoQ decline in corporate advances, while a strong sequential recovery was witnessed in SME/Retail loans,” the brokerage said.

Buy for a 50% upside potential on the stock

Motilal Oswal Financial Services expects the stock of Axis Bank to touch levels of Rs 975, which from a price of Rs 663, is slightly under the 50% appreciation.

The bank saw a loan book growth of 10% YoY (up 1.1 per cent QoQ) with retail loans up 16% YoY (4% QoQ). “Retail loan disbursements were up 54 per cent QoQ. Strong trends were witnessed in the SME portfolio as well which grew 18% YoY (7% QoQ), while corporate growth remained weak (down 5% QoQ). On the liability front, deposits grew 3% QoQ, led by a 6% QoQ growth in CASA deposits. As a result, the CASA ratio improved by 100 basis points QoQ to 44% (quarterly average CASA stood at 42%),” Motilal Oswal has said.

The broking firm has cut its earnings estimates for FY22/FY23E by 6%/4% to factor in the higher operating expenses and lower NII, and remain watchful of a recovery in the bank’s operating earnings. “We estimate Axis Bank to deliver RoA/RoE of 1.5%/14.6% in FY23. Maintain Buy with revised target price of Rs 975,” Motilal Oswal has said.

Investors should be cautious

We have been telling our readers to remain cautious on large scale investment, after the worries over the new omicron variant. Our own belief is that the markets are overvalued at this juncture and declines from these levels is also highly possible. Investors should therefore exercise some caution before investing.

“We expect the Centre/ state governments to remain proactive, given their experience from the second COVID wave in Apr-May’21, and guidelines to evolve as the trajectory of the new variant becomes clearer. We expect the market to witness elevated volatility in the near term. However, valuations after the pullback, are relatively reasonable now at 23.3x/19.5x FY22E/FY23E Nifty EPS. Hence we would advise investors to buy into this correction,” says Siddhartha Khemka, Head – Retail Research, Motilal Oswal Financial Services Ltd.

We suggest investors to only nimble into stocks and that too on declines. Large scale allocation of money at this stage could be a little risky.

1. Samtex Fashions:

This readymade apparels firm listed on the BSE in a month’s time has given multibagger returns to the tune of 154% considering the price of Rs. 1.51 apiece on October 29, 2021. In trade on November 30, 2021, even in a subdued market, the scrip hit upper circuit limit and settled at 52-week high price of Rs. 3.83 per share. Samtex Fashions last commands a market cap of Rs. 28 crore. The scrip’s YTD return and 1-year return are 361% and 681%, respectively.

Not only this penny scrip from the textile space but many counters from the space have been seen gaining traction during the November month. Probably, government’s PLI (production linked incentive) scheme has come as a help for the sector.

Samtex Fashions started in the year 1993 in collaboration with Samsung is a premier entity in the world of fashion. The firm is into manufacturing quality garments for exports to major stores in the US and Europe as welll as premium brands in the country. The company is a recognised GoI export house.

2. Pan India Corporation:

The software medium and small sector entity during the review period i.e. last 1 month has produced 108% return inching higher from a price of Rs. 1.38 as on October 29 to currently at Rs. 2.87. The scrip’s 1-year and YTD are still more fascinating at 1411% and 744%, respectively.

The company incorporated in 1984 under the name Fairdeal Leasing is primarily engaged in buying, selling, transferring, hypotheticating, dealing in and disposing securities including shares, stocks debentures, debenture stock, securities, properties of any other entity including securities of local authority, certficates or bonds.

3. Shree Bhawani Paper:

This paper company stock also during the time period has shown resilience and gained by 107 percent from a price of Rs. 2.92 just a month ago to now currently at above Rs. 6 per share on the BSE. The stock’s market cap is at Rs. 21 crore. The stock’s 1-year return has been at 71 percent.

The company is primarily engaged in manufacturing paper and exports its product line to Middle East, Nepal and other countries. Uncoated paper as well as paper board are the company’s product which find application in writing and printing purposes.

4. Sharp Investments Ltd.

This finance sector also spurted by a similar degree in one month and provided multibagger return of over 100% of 107.5% in the last 1-month. The scrip closed today at a price of Rs. 2.49 while its market cap stands at Rs. 60 crore. This is a zero debt company. The company’s 1-year and YTD return are astounding at 1283% and 858%, respectively.

Sharp Investments is an NBFC firm carrying out the business of extending loan against shares, securities and properties. The firm also offers other loans including personal loans, corporate loans. Beside it also offer trade financing and trading in shares and securities.

Points to note when investing in Penny stocks

The investment into penny stocks entail a high risk nonetheless if one goes by the filters aronymed as ‘SOLID’ implying 6 criterias in the selection of penny stocks namely:

1. S-Strong balance sheet or financials

2. O- Owners of the firm are also operators of the firm

3. L-long term viability of company’s business

4. I-for income generating

5. D-deep discount in valuations-Experts see penny stocks available at a deep discount of say 20 percent net current assets less total liabilities as a good option.

Disclaimer:

We have just collated the list of few penny stocks priced below Rs. 10 that in 1-month’s time doubled investors’ money and have superb 1-year gains. Nonetheless, the story should not be construed as a recommendation to buy into these penny stocks that are highly risky.

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