Kotak Mahindra Bank Target Forecast; What Should Investors Do After Q4 Results?

The stock of Kotak Mahindra Bank climbed 2% in early trading on May 5, a day after the business released its March quarter earnings.

Kotak Mahindra Bank, a private sector lender, reported a 64.5 percent increase in net profit to Rs 2,767.4 crore in the March quarter, beating expectations by a wide margin, thanks to greater net interest income and provision writebacks.

In the third quarter, net interest income increased by 17.6% to Rs 4,521 crore. Non-interest revenue increased by 21.4 percent to Rs 1826 crore year over year. Net interest margin (NIM), a crucial indicator of profitability, was 4.78 percent this year, up 39 basis points (bps) from the previous year.

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In the fourth quarter, the bank wrote back Rs 453 crore in Covid provisions, resulting in a provision and contingency write-back of Rs 306 crore. In the previous year, it had made provisions of Rs 734 crore.

Asset quality has improved sequentially, with gross non-performing assets (NPAs) as a proportion of total advances falling 91 basis points from a year ago to 2.34 percent in the March quarter. Net NPA fell to 0.64 percent from 1.21 percent in the same period previous year.

In absolute terms, GNPA fell by Rs 956 crore to Rs 6,470 crore in Q4FY22, while net NPA fell by Rs 969 crore to Rs 1737 crore.

Here is what brokerages have to say about the stock and the company after March quarter earnings:

Morgan Stanley | Target Price: Rs 1965

Morgan Stanley has maintained an equal-weight recommendation on Kotak Mahindra Bank, based on value and risk return. It maintained its target price of Rs 1,965 per share.

On decreased credit costs, profit was 19 percent higher than expected, but core PPoP was in line with expectations. The increase of loan growth is still on pace.

According to CNBC-TV18, Morgan Stanley expects core PPoP to grow at a 22 percent CAGR from FY22 to FY24, compared to 4 percent in FY21-22.

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CLSA | Target Price: Rs 2200

CLSA maintains a buy recommendation on the company, with a target price of Rs 2,200 per share.

Growth was strong, as was NIM performance. As asset quality improves, provision reversals become more common.

To fund loan expansion, liability mobilisation will need to increase dramatically.

According to CNBC-TV18, the bank can provide a 20% CAGR and a targeted NIM decrease of 10-15 bps will be a favourable driver.

Jefferies | Target Price: Rs 2600

Kotak Mahindra Bank got a buy recommendation from brokerage company Jefferies, with a target price of Rs 2,600 per share.

Because of the writeback of credit expenses and greater other revenue, the profit was more than expected. With strong asset quality, NII growth was solid and in line with our expectations.

CASA’s current growth rate of 12% has to be improved. The key is growth and clarity on succession, according to CNBC-TV18.

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Prabhudas Lilladher | Target Price: Rs 1925

KMB’s Q4 profits of Rs26.9 billion (PLe: Rs17.3 billion) were higher, thanks to excellent loan growth of 21% YoY, strong fee revenue accretion, and provision write-back.

Margins improved somewhat (+16bps QoQ), owing to a larger CASA share. Overall asset quality increased QoQ as a result of enhanced collections. COVID provisions are 20 basis points lower than peers, and restructuring is 44 basis points lower.

The bank is concentrating on accumulating sticky liabilities, which will be aided by asset growth fueled by good customer acquisition. However, tech investments will continue, which may keep opex at a high level.

Although prices are high to upgrade the stock, we favour Kotak Bank because of its strong lending procedures and balance sheet management. We keep ‘ACCUMULATE’ with a target price of Rs 1,925 based on SOTP.

Motilal Oswal | Target Price: Rs 2000

Kotak Mahindra Bank had a strong core operational performance and expanded its loan portfolio. NIM has risen steadily in recent years, reaching the upper limit of the range.

With a CASA ratio of 61 percent, the bank continues to make steady progress in creating a strong liability franchise (highest in the industry).

With a target price of Rs 2,000/share (3.1x FY24E ABV + Rs 587 for its subsidiaries), we retain our neutral rating.

Sharekhan | Target Price: Rs 2250

With a strong low-cost liability franchise and a lower core credit cost scenario, the bank has stronger capital buffers.

With its balanced growth posture, solid underwriting, assessment skills, and healthy digitization benefits, we believe the bank is well positioned to gain from the credit demand cycle.

Furthermore, as its subsidiaries acquire size and market share in the future, we expect them to contribute to consolidated earnings.

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We retain our buy recommendation on the company, with a price target of Rs 2,250 based on SOTP.s

At 09:28 hrs Kotak Mahindra Bank was quoting at Rs 1,809.00, up Rs 32.35, or 1.82 percent on the BSE.

Disclaimer :- The views and recommendations made above are those of individual analysts or broking companies, and not of Ours.
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