Review

In this edition, we have reviewed Axis Bank and Torrent Pharmaceuticals. We suggest our reader-investors to HOLD Axis Bank and Torrent Pharmaceuticals 




 

We had recommended Axis Bank in Volume 36, Issue No. 11 dated April 26 to May 9, 2021 under the ‘Cover Story’ segment. The recommended price for the stock was ₹669.35. We had recommended the stock on the basis of improving asset quality, leading position in digital space, and de-risking balance sheet. Axis Bank is India’s third-largest private sector bank. The bank provides a full range of financial services to customer groups including large and mid-sized corporations, MSME businesses, agricultural enterprises and retail businesses. With branches in Singapore, Dubai (DIFC) and Gift City (IBU), representative offices in Dhaka, Dubai, Abu Dhabi, and Sharjah, and an overseas subsidiary in London, the bank’s foreign operations are distributed among eight worldwide offices. 

The corporate lending, trade finance, syndication, investment banking, liability businesses and private banking and wealth management services are the main areas of focus for the worldwide offices. On the quarterly front, the net interest earned by the bank in the second quarter of Q2FY23 came in at ₹20,782.80 crore as against ₹16,682.64 crore in the corresponding quarter of the previous fiscal, an increase of 24.58 per cent. The total income in Q2FY23 was ₹25,258.80 crore, an increase of 20.47 per cent from ₹20,966.61 crore in Q2FY22. The profit after tax went through the roof up by 66.29 per cent to reach ₹5,625.25 crore in Q2FY23 as against ₹3,382.78 crore in Q2FY22.

Net interest earned by the bank in FY22 came in at ₹68,846.06 crore, an increase of 6.91 per cent from ₹64,397.36 crore in FY21. The total income earned by the bank in FY22 was ₹86,114.19 crore, an increase of 10.44 per cent from ₹77,974.28 crore earned in the previous fiscal. The profit after tax in FY22 increased by 95.31 per cent to reach ₹14,164.35 crore as against ₹7,252.39 in FY21. The bank has posted 14 per cent growth in business with strong 18 per cent surge in its loan book. The asset quality of the bank has further improved in Q2FY23.

Growth in advances was driven by retail loans rising 22 per cent YoY to ₹423,235 crore at end September 2022, while credit to MSME moved up 28 per cent to ₹78,209 crore at end September 2022. The corporate credit rose 7 per cent to ₹229,431 crore end of September 2022. By the end of September 2022, the bank had a network of 4,760 domestic branches and extension counters located in 2,676 centres, up from 4,679 domestic branches and extension counters located in 2,658 centres. The bank operates 16,043 ATMs and cash recyclers all around the nation. Hence, we recommend HOLD.


 

 

We had recommended Torrent Pharmaceuticals in Volume 36, Issue No. 11 dated April 26 to May 9, 2021 under the ‘Choice Scrip’ segment. The recommended price for the stock was ₹1,315.79. We had recommended the stock on the basis of huge growth potential, focus on cost reduction and good returns on capital employed. Torrent Pharmaceuticals, the flagship company of the Torrent Group, is one of the country’s leading pharmaceutical enterprises. The company was the first to introduce the idea of niche marketing to India.

Torrent Pharmaceuticals started international acquisitions include API plant of Glochem Industries in 2016. In 2017, Torrent Pharmaceuticals’ position in the Indian pharmaceutical market was enhanced by the addition of women’s healthcare brands from Novartis and Unichem, as well as the company’s Sikkim plant. Looking at the quarterly trends, on a consolidated basis the net sales for Q2FY23 increased by 7.51 per cent to ₹2,261 crore from ₹2,103 crore reported for Q2FY22. It reported operating profit of ₹695 crore for Q2FY23, thus contracting by 2.25 per cent compared to the operating profit of ₹711 crore posted for Q2FY22.

The company’s net profit went down to ₹312 crore in Q2FY23 compared to the net profit of ₹316 crore earned in Q2FY22. On the annual front the net sales for FY22 increased by 6.76 per cent to ₹8,419 crore from ₹7,886 crore reported for FY21. It recorded operating profit of ₹2,628 crore for FY22, thus improving by 3.59 per cent against operating profit of ₹2,537 crore posted for FY21. The net profit declined by 37.94 per cent to ₹777 crore in FY22, as compared to ₹1,252 crore recorded in FY21. Revenues grew 7.2 per cent YoY to ₹2,291 crore, mainly driven by high double-digit growth in India and Brazil. 

Its US business grew 2.8 per cent YoY to ₹292 crore. The impact of currency and volume growth were the key drivers of growth. Its Germany business de-grew 12 per cent YoY to ₹220 crore due to tender losses in the previous quarters. Growth in domestic formulation was aided by 9 per cent price hike, 6 per cent volume growth and 4 per cent new launches. Sitagliptin’s recent launch in July has been scaling up nicely, and the company came in first place among other new brands introduced that month. Torrent Pharmaceuticals is set to acquire Curatio Healthcare for enterprise value of ₹2,000 crore. The deal has been completed on October 14, which is expected to be integrated fully by the end of Q3FY23. Hence, we recommend HOLD.