Dolat Capital Market's research report on Kotak Mahindra Bank
KMB reported NII, PPoP, and PAT growth of 17%, 31%, and 27% YoY respectively despite advances de-growth of 4% YoY, led by improvement in CoF, higher fee lines, elevated treasury gains and lower provisions. Including standstill NPAs, slippages would have been ~1.1% and gross NPA would be stable QoQ at 2.7%. PCR increased by ~700 bps QoQ to 76% and stood at ~72% on a pro forma basis, implying healthy recoveries and low write-offs during the quarter. Standard loan cover stood at 0.6% of advances as of Sep-end, same as last quarter. Management noted that the stock of provisions the bank held was adequate and conservative. Despite weak growth trends, continued moderation in CoF has aided NII growth. Growth should not be a challenge eventually, given the comfort on CoF. We expect incremental asset quality risks to be limited for KMB owing to its conservative stance on lending and strong risk practices.
However, trading at 4.1x 1 year forward ABV, valuations factor in most positives. Rolling over our estimates to Sep22E, we maintain our ACCUMULATE rating with a revised TP of Rs1,580 (from Rs1450 earlier) based on 3.3x Sep-22E ABV for the standalone bank and value of subsidiaries, implying a P/ABV of 4.5x.
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