Motilal Oswal is bullish on Kotak Mahindra Bank recommended buy rating on the stock with a target price of Rs 1650 in its research report dated October 26, 2020.
Motilal Oswal 's research report on Kotak Mahindra Bank
Kotak Mahindra Bank (KMB) reported a strong quarter - with lower provisions and higher treasury income boosting earnings, even as core PPOP grew 19% YoY. The bank reported an uptick in fee income and margins too expanded 12bp QoQ, while loan growth stood flat. On the asset quality front, slippages stood lower (partially aided by the SC order), driving sequential improvement in asset quality ratios, while PCR increased sharply to 76%. The bank carries total COVID-19 provisions of INR12.79b (0.6% of advances). On the business front, the loan book stood flat QoQ, reflecting the bank's cautious approach in a weak environment. Disbursals under the ECLG scheme exceeded INR81b in Oct'20 (INR76b as of end-Sep'20), while the Agri/Tractor portfolio reported healthy growth. CASA growth remains steady, driving further improvement in the CASA mix to 57.1%. We increase our FY21/FY22 earnings by 27%/20%, aided by steady revenues and sharp decline in provisioning expenses. We upgrade our rating to Buy, following a gap of 10 quarters, when we had downgraded our rating to Neutral, nearly at current price.
We increase our FY21/FY22 earnings by 27%/20%, led by steady revenues and sharp decline in provisioning expenses, and introduce FY23 to our estimates. We upgrade our rating to Buy after a gap of 10 quarters and revise our TP to INR1,650 (3.2x Sep'22E ABV + INR493 for subs).
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