Prabhudas Lilladher recommended hold rating on Kotak Mahindra Bank with a target price of Rs 1398 in its research report dated July 19, 2018.
Prabhudas Lilladher's research report on Kotak Mahindra Bank
KMB's standalone earnings was below expectations with PAT at Rs10.2bn (PLe: Rs11.9bn) growing at modest 12% YoY mainly on back of (i) lower NII with marginally higher cost of funds and (ii) higher MTM provisions on investment book with high non-HTM mix but with lower modified duration. Good opex control, moderate other income and steady asset quality were the positives in the 1Q results. Bank took conscious decision to increase provisions on the SME NPA loans on possible significant deterioration of value of collaterals in the market place than previously estimated in the last one year, but assured that PCR is now at reasonable levels.
We increase our TP to Rs1,398 mainly on back of increase in insurance valuation from Rs59 to Rs118/share post the IEV disclosures in Q4FY18 and stretched our multiples slightly on lending business leading to limited upside on valuations front and hence we downgrade to 'HOLD" from ACCUMULATE rating.
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