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Last Updated : Oct 23, 2019 12:14 PM IST | Source:

Kotak Mahindra Bank: Should investors buy, sell or hold after Q2 earnings?

While having a buy call and raising price target to Rs 1,960 from Rs 1,850, CLSA said the bank continued to fare well in strengthening its deposit franchise.

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Brokerage houses have remained mixed in rating on Kotak Mahindra Bank after the lender reported higher-than-expected profit in the September quarter, but the asset quality weakened sequentially.

The stock gained nearly 40 percent in he last one year amid steady earnings growth. It was quoting at Rs 1,618.45, down Rs 10.45, or 0.64 percent on the BSE at 11:18 hours IST.

While having a buy call and raising the price target to Rs 1,960 from Rs 1,850 (implying 20 percent potential upside from current levels), global brokerage CLSA said the bank continued to fare well in strengthening its deposit franchise.


"Lower funding cost and taxes offered scope to de-risk further. We see a 25 percent profit CAGR over FY19-22 & return on equity improving toward 16 percent," said CLSA which disappointed to see a rise in slippage though stressed loans remained low.

Asset quality weakened in the September quarter with gross non-performing assets (as a percentage of gross advances) rising 13 bps sequentially to 2.32 percent and the net NPA climbing 12 bps QoQ to 0.85 percent in Q2.

The bank reported a profit growth of 51 percent in quarter ended in September YoY due to lower tax rates, and the net interest income jumped 25.2 perent YoY, with the loan growth at 15 percent YoY.

Sharekhan said the bank had performed steadily in a tough phase for the banking sector, demonstrating its stable business model. It believes, with a lot of other PSU counterparts still struggling to get out of the woods, well-capitalised banks like Kotak Mahindra Bank are placed to grab market share.

Hence, the brokerage maintained positive view on the stock and expects a 15-18 percent upside from current levels.

Credit Suisse has maintained its neutral rating on the stock but raised target price to Rs 1,450 from Rs 1,340 per share as growth slowed further though tax cuts and NIMs boosted earnings.

The bank's net interest margin improved to 4.61 percent in Q2FY20 from 4.49 percent in previous quarter.

Disclaimer: The above report is compiled from information available on public platforms. advises users to check with certified experts before taking any investment decisions.

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First Published on Oct 23, 2019 12:14 pm
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