Turnaround tales: These companies are back in black in Q4 should you invest in them

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The Q4FY21 result seasons has been action-packed so far as companies like ICICI Bank, IndusInd Bank saw its net profit expanding three-fold. While Adani Ports profit jumped 2.8 times and Reliance Industries net profit doubled from in the corresponding period of the previous fiscal.

While many companies saw their profit expand multi folds some were back in the black. For instance, Axis Bank reported stellar performance for the March quarter a net profit of Rs 2,677 crore as against a net loss of Rs 1,387.8 crore in the year-ago quarter.

Bank’s Net Interest Income (NII) grew 11% YOY to Rs 7,555 crores in Q4FY21 from Rs 6,808 crores in Q4FY20. Net interest margin (NIM) for Q4FY21 was 3.56%, as against 3.55% for Q4FY20.

Citing stellar Q4 earnings most brokerage houses have upgraded the stock.

Motilal Oswal | Target Price: Rs 925 | Upside: 29%

Axis Bank has delivered a strong performance and appears well-positioned to report robust earnings traction. Moreover, moderation in fresh slippages, coupled with improved underwriting and an increasing retail mix, would help maintain strong credit cost control. On the business front, retail disbursements reached an all-time high during the quarter, with strong disbursements seen in Home Loans (+45% QoQ) and loan against property (+51% QoQ). The bank delivered strong sequential growth across segments. On the asset quality front, total restructuring stood at 0.3% of loans. Furthermore, the bank has ~72% coverage on GNPL and also holds an additional provision buffer of 2% to protect the balance sheet against any potential stress. Credit cost to decline to 1.5%/1.3% over FY22/FY23. Increase FY22/FY23E earnings by 12%/6% and estimate it to deliver Return on Assets/Return on Equity of 1.7%/16.4% in FY23.

Sharekhan | Target Price: Rs 900 | Upside: 25%

Axis Bank is available at 2.2x/2.0x its FY2022E/FY2023E adjusted book value. Valuations are reasonable and there is potential for re-rating as earnings pickup and economic scenario normalises. A conservative provisioning policy, comfortable capitalisation, overall franchise value, and a high provision coverage ratio (PCR) are positives and will help the bank ride over medium-term challenges and provide support to growth and valuations. Completion of the deal with Max Financial Services and other bancassurance partnerships augur well for fee income sustainability and growth in the long run.

Likewise, security, facility management and cash logistics solutions provider Security Intelligence Services (SIS) achieved the highest quarterly revenues of Rs 2,445 crore in Q4FY21 registering a growth of 10.7% in the same quarter previous year. On the bottom line the improvement was sharp it posted net profit of Rs 102.23 crores for the period ended March 31, 2021 as against loss of Rs 3.91 crores for the period ended March 31, 2020.

Axis Securities | Target Price: Rs 451 | Upside: 22%

SIS has a better services mix and multiple long-term contracts spread across verticals. With depreciation in INR and strong execution EBITDA, margins are likely to expand in the near term. Assign 19x P/E multiple to its FY23E earnings of Rs. 23.2/share.

The company has announced a Rs 100 crore share buyback programme to acquire 18,18,181 equity shares at Rs 550 per share. Existing shareholders can participate in the buyback and garner a return of 48%. The buyback opens on May12 and closes on May 27, 2021.

(Disclaimer: The recommendations in this story are by the respective research and brokerage firm. Money9 & its management do not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)