Religare's Results Update - Axis Bank, Sasken Communication

MUMBAI: Religare Research has given a ‘Buy’ call on Axis Bank and Sasken Communication post their second quarter earnings.

AXIS BANK (formerly UTI Bank) has delivered above-expected results on strong growth in advances accompanied by healthy non-interest income. Net interest income expanded 73 per cent year on year to Rs 590 crore driven by the higher asset growth as well as margin expansion.

The bank’s net interest margin rose 36 basis points from year earlier to 3.3 per cent assisted by proceeds from the recent equity issue and an increase in low-cost current account and savings account deposits. The fresh issue has led to a substantial rise in tier I capital, thereby pointing to sustained business growth.

In view of the strong results we are revising our net interest income and profit after tax estimates upwards. Our target price accordingly rises from Rs 835 to Rs 904 and we reaffirm our Buy call on the scrip, the research firm says.

Recommendation: BUY; CMP: Rs 813; Target: Rs 904



SASKEN COMMUNICATION’s Q2 operational performance has been much better than expected. Though volume growth was in line with our estimates, the EBITDA margin expansion and net profit growth was materially above expectations.

A one-time receipt of Rs 10.5 crore from a customer, reduction in R&D expenditure for products and higher employee utilisation resulted in an 866 basis points expansion in the EBITDA margin over Q1. Also, higher-than-expected foreign exchange gains enabled the net profit to grow 124 per cent quarter on quarter.

We maintain our revenue and earnings per share estimates for FY08, but revise our 2008-09 projections to realign them to our new exchange rate estimates of 39/ $ (from 40.5/ $ previously). We reduce our FY09 EPS estimate and target price by 17 per cent and 5 per cent respectively, but maintain our Buy recommendation on the stock.