KRChoksey recommended accumulate rating on Kotak Mahindra Bank with a target price of Rs 1620 in its research report dated July 23, 2019.
KR Choksey's research report on Kotak Mahindra Bank
Advances grew 17.6% YoY/1.1% QoQ despite an overall consumption slowdown in the economy. Vehicle financing saw muted growth largely due to decline in auto sales across the sector (ex-CV). Deposit mobilization remained buoyant with growth of 22.8% YoY/3.1% QoQ. CASA at 50.7% increased by 45 bps YoY and down by 179 bps QoQ. NII at INR 3,173 Cr. is up 22.8% YoY/4.1% QoQ while Non-Interest Income was up 2.7% on sequential basis (+12.0% YoY). PPOP at INR 2,399 Cr. is up 18.0% YoY/ 5.1% QoQ on back of NIM expansion. Total Income at INR 4,478 Cr. is up 19.5% YoY/3.7% QoQ. The bank has provided for INR 317 Cr. as provisions during the quarter, down 32.6% YoY, but higher by 85% QoQ. Asset quality fell with GNPAs at 2.19%, increasing by 2bps YoY / 5bps QoQ while NNPAs at 0.73% went down by 13bps YoY / 2 bps QoQ. PCR stood at 67.0%. Standalone PAT at INR 1,360 Cr. was up 32.7% YoY while consolidated PAT increased 23% YoY to INR 1,932 Cr.
Outlook
We apply a P/B multiple of 4.8x to the FY20 book value of the parent bank and arrive at a TP of INR 1,620 per share on SoTP basis, an upside of 8.4% over CMP. Since, our last “BUY” rating, the shares of Kotak Bank has advanced 6.4%. We remain positive on the counter and recommend an “Accumulate” rating.
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