Broker's call: Kotak Mahindra Bank (Buy)

| Updated on January 23, 2019 Published on January 23, 2019

Reliance Securities

Kotak Mahindra Bank (Buy)

CMP: ₹1,276.2

Target: ₹1,.390

Kotak Mahindra Bank (KMB) has reported a healthy set of numbers in 3QFY19 on the back of a strong 23 per cent y-o-y growth in NII, 8 bps q-o-q improvement in GNPLs to 2.07 per cent, high growth in SA deposits at 27 per cent y-o-y and strong core fee income growth of 25 per cent y-o-y despite moderation in distribution business. Rise in operating expenses in 3QFY19 is attributable to higher advertising cost, offset by reversal in provisioning for investment depreciation, which led to a strong 23 per cent y-o-y growth in net profit. Advances growth at 24 per cent y-o-y was driven by corporate loans where the bank gained further market share. Corporate book is fairly spread across sectors.

The bank’s above industry average valuations can be attributed to its strong lending franchise and capital position; rising CASA share though at a higher cost; healthy growth in non-fund based income, its impeccable asset quality performance across cycles, improving cover for GNPLs, and high return ratios. Clarity on dilution in promoter holding is awaited and could be an overhang on the stock. At CMP, the stock trades at 1-year forward multiple of 5.2x.

Published on January 23, 2019
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