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Last Updated : Sep 18, 2018 02:24 PM IST | Source:

Buy Kotak Mahindra Bank; target of Rs 1378: HDFC Securities

HDFC Securities is bullish on Kotak Mahindra Bank has recommended buy rating on the stock with a target price of Rs 1378 in its research report dated July 20, 2018.

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HDFC Securities' research report on Kotak Mahindra Bank

A  one-time  MTM hit (~Rs 2.1bn) and higher NPA provisioning (LLP +49% QoQ, PCR  rose to 61%) capped KMB’s net earnings (down 9% QoQ, missing estimates by ~7%). The business remains healthy as ever, with broad based loan growth (+24%  YoY),  best  in  class  NIMs (4.30%) and negligible net stress incl. SMA-II (97bps, down 6bps). Opex growth of merely 10% YoY (flat QoQ) despite Rs 300-400mn invested in 811 was praiseworthy.  Though  the differential rate offering comes at an upfront cost (Rs 12-13bn a  year),  it will help KMB to garner low cost deposits (esp. with interest rates  rising).  Rapid asset growth will (more than) compensate for this as KMB  commands  a  higher  share  in  lucrative  lending  spaces. Cross sell opportunities  on  the  acquired customer base will also help.


Fast growing subs  will help KMB flower into a full service financial conglomerate. With best-in-class  return  ratios  (core  RoAA  of  1.77%  in  FY20E),  premium valuations  are  justified. Maintain BUY with SOTP of Rs 1,378 (4.5x Mar-20 core ABV of Rs 238 + Rs 309 for subs).

For all recommendations report, click here

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First Published on Jul 26, 2018 04:49 pm
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