Axis Bank, TCS near all-time high after strong Q4 results

Axis Bank was up 3% to Rs 765, while TCS up 2.4% to Rs 2,245 on BSE, is 1.25 per cent away from its record high level of Rs 2,273 hit on October 1, 2018 in intra-day trade.

Shares of Axis Bank and Tata Consultancy Services (TCS) were trading close to their respective all-time high levels, after reporting a strong earnings growth for the fourth quarter of fiscal 2018-19 (Q4FY19).

Axis Bank was up 3 per cent to Rs 765 on the BSE, after the private sector lender reported a net profit of Rs 1,505 crore for Q4FY19, as against a net loss of Rs 2,189 crore in the year-ago quarter. The strong performance during the quarter comes on back of healthy growth both in interest income and other income, as well as a steep fall in provisions over the previous year quarter. The stock is 3 per cent away from its all-time high level of Rs 789, touched on March 28, 2019 in intra-day trade.

The bank’s gross non-performing assets (NPAs) and net NPAs fell for the fourth straight quarter owing to lower slippages and healthy recoveries. GNPA, as a percentage of gross advances, during the quarter under review came down to 5.26 per cent as of March 2019, from 5.75 per cent in December 2018 and 6.77 per cent in March 2018.

Looking ahead, analysts at Reliance Securities expect the bank to deliver sustained improvement in operating metrics, led by decline in credit costs, sustained balance sheet growth, and improvement in operating efficiency.

"Axis Bank has seen re-rating in FY19 on back of lower stress ratios, improving coverage and reducing risks on balance sheet. As management team is in largely in place, from here on, bank has to sweat on multiple areas to improve its return ratios and manage underwriting & economic challenges which we closely watch," said analysts at Prabhudas Lilladher in result update note.

TCS, on the other hand, was up 2.4 per cent to Rs 2,245 on BSE, is 1.25 per cent away from its record high level of Rs 2,273 hit on October 1, 2018 in intra-day trade. In past two weeks, post Q4FY19 results, the stock of IT major rallied 11 per cent, as compared to 1 per cent rise in the S&P BSE Sensex.

The company had reported better-than-expected 2.4 per cent growth in constant currency (CC) revenue in Q4FY19. Most analysts have maintained a ‘buy’ rating on the stock post its Q4FY19 numbers on expectation of double-digit growth in FY20 on improved deal wins, stronger exit rate, broad-based growth, robust pipeline and stable pricing environment.

“TCS strong TCV wins, improving YoY growth in BFSI, all-round vertical growth, rising digital revenue and healthy 4Q exit rate drive confidence on underlying momentum, and we expect the IT major to comfortably post double-digit revenue growth in FY20E. Digitalisation and Scalability of the IT industry in the low penetrated geographies of the world to aid growth in the overall IT industry in the coming years,” said analyst at Anand Rathi Share and Stock Brokers.  The brokerage firm initiates coverage on TCS with a ‘buy’ rating and a target price of Rs 2,510 per share.