Accumulate Kotak Mahindra Bank; target of Rs 1650 KR Choksey

KR Choksey's research report on Kotak Mahindra Bank

NII has grown strongly 17% YoY/5% QoQ to INR 3,913 Cr. on stronger NIMs as funding costs improved. Advances fell 4% YoY/flat QoQ to INR 2,04,845 Cr. Deposits too have not grown sequentially, 12% YoY but funding costs (computed) have been lower by 36 bps QoQ. CASA was at 54%, lower 257 bps QoQ/ higher 56 bps YoY. CASA and TDs below INR 5 Cr. was 91% of total deposits. The other incomes rose robustly, growing 88% QoQ as fee income growth regained strength. GNPA were 2.55% & NNPA were 0.64%. Ex the Supreme Court’s (SC) standstill, GNPA would have been 2.70% and NNPA 0.74%. The Bank has provided for such advances. The total credit costs are 0.62% of advances.

Outlook

We raise our target to INR 1,650 per share, using SOTP valuation applying a P/B multiple 4.7x to the FY22 adj. BVPS of INR 315 (standalone business) for the bank and INR 182 per share for subsidiaries, an upside of 6.4% over the CMP. Accordingly, we reiterate our “ACCUMULATE” recommendation on the shares of KMB.

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