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Axis Securities Report
Here are our top picks for April 2024:
Bank of Baroda - Steady growth with stable asset quality
Bank of Baroda has a target of growing loan books at 12-14%. We believe the bank's focus on reducing its corporate mix in its overall loan book would make the bank more resilient during a weaker business cycle. It intends to keep the Loan Deposit Ratio at 80-82% and target net interest margin of 3.15%. The bank has guided slippages at 1- 1.25% and credit costs to remain at 1% level.
Key risks: a) Slowdown in systemic credit growth.
CreditAccess Grameen - Strong growth runway, premium valuations justified
We prefer CreditAccess Grameen Ltd. amongst the microfinanciers, despite its premium valuations. The company has continued to outperform its peers across parameters and is eligible to trade at a premium versus its peers.
We believe the company remains wellpoised to deliver a strong performance backed by-
Adequate capitalisation,
Improving operational efficiency,
Strong margin profile despite offering the lowest rates in the industry, and
Robust asset quality.
We expect CreditAccess Grameen to deliver a healthy return on asset/return on equity of 5.5%+/24-25% over the medium term.
We revise our earnings estimates upwards by 3-5% over FY24-26E.
Key risks:
Moderation in GLP growth momentum,
Inability to scale up new products and business in new geographies.
Westlife Foodworld - Well placed to grow
We maintain our positive outlook on Westlife Foodworld Ltd. Our confidence in the company's bright future prospects is supported by its strong execution track record of revenue/Ebitda growth of 17%/51% over FY16-20, which was driven by new product launches and cost rationalization programs (100-200 bps cost reduction every year).
We expect the company to deliver healthy revenue/Ebitda growth of 15%/16% CAGR over FY23-26E (Post Ind. AS), led by above growth tailwinds.
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