What should investors do with Kotak Mahindra Bank post Q4 earnings: buy, sell or hold?

Stocks

Net interest income in Q4 FY21 grew by 8 percent to Rs 3,842.81 crore compared to the year-ago.

‘); $ (‘#lastUpdated_’+articleId).text(resData[stkKey][‘lastupdate’]); //if(resData[stkKey][‘percentchange’] > 0){ // $ (‘#greentxt_’+articleId).removeClass(“redtxt”).addClass(“greentxt”); // $ (‘.arw_red’).removeClass(“arw_red”).addClass(“arw_green”); //}else if(resData[stkKey][‘percentchange’] = 0){ $ (‘#greentxt_’+articleId).removeClass(“redtxt”).addClass(“greentxt”); //$ (‘.arw_red’).removeClass(“arw_red”).addClass(“arw_green”); $ (‘#gainlosstxt_’+articleId).find(“.arw_red”).removeClass(“arw_red”).addClass(“arw_green”); }else if(resData[stkKey][‘percentchange’] 0) { var resStr=”; var url = ‘//www.moneycontrol.com/mccode/common/saveWatchlist.php’; $ .get( “//www.moneycontrol.com/mccode/common/rhsdata.html”, function( data ) { $ (‘#backInner1_rhsPop’).html(data); $ .ajax({url:url, type:”POST”, dataType:”json”, data:{q_f:typparam1,wSec:secglbVar,wArray:lastRsrs}, success:function(d) { if(typparam1==’1′) // rhs { var appndStr=”; var newappndStr = makeMiddleRDivNew(d); appndStr = newappndStr[0]; var titStr=”;var editw=”; var typevar=”; var pparr= new Array(‘Monitoring your investments regularly is important.’,’Add your transaction details to monitor your stock`s performance.’,’You can also track your Transaction History and Capital Gains.’); var phead =’Why add to Portfolio?’; if(secglbVar ==1) { var stkdtxt=’this stock’; var fltxt=’ it ‘; typevar =’Stock ‘; if(lastRsrs.length>1){ stkdtxt=’these stocks’; typevar =’Stocks ‘;fltxt=’ them ‘; } } //var popretStr =lvPOPRHS(phead,pparr); //$ (‘#poprhsAdd’).html(popretStr); //$ (‘.btmbgnwr’).show(); var tickTxt =’‘; if(typparam1==1) { var modalContent = ‘Watchlist has been updated successfully.’; var modalStatus = ‘success’; //if error, use ‘error’ $ (‘.mc-modal-content’).text(modalContent); $ (‘.mc-modal-wrap’).css(‘display’,’flex’); $ (‘.mc-modal’).addClass(modalStatus); //var existsFlag=$ .inArray(‘added’,newappndStr[1]); //$ (‘#toptitleTXT’).html(tickTxt+typevar+’ to your watchlist’); //if(existsFlag == -1) //{ // if(lastRsrs.length > 1) // $ (‘#toptitleTXT’).html(tickTxt+typevar+’already exist in your watchlist’); // else // $ (‘#toptitleTXT’).html(tickTxt+typevar+’already exists in your watchlist’); // //} } //$ (‘.accdiv’).html(”); //$ (‘.accdiv’).html(appndStr); } }, //complete:function(d){ // if(typparam1==1) // { // watchlist_popup(‘open’); // } //} }); }); } else { var disNam =’stock’; if($ (‘#impact_option’).html()==’STOCKS’) disNam =’stock’; if($ (‘#impact_option’).html()==’MUTUAL FUNDS’) disNam =’mutual fund’; if($ (‘#impact_option’).html()==’COMMODITIES’) disNam =’commodity’; alert(‘Please select at least one ‘+disNam); } } else { AFTERLOGINCALLBACK = ‘overlayPopup(‘+e+’, ‘+t+’, ‘+n+’)’; commonPopRHS(); /*work_div = 1; typparam = t; typparam1 = n; check_login_pop(1)*/ } } function pcSavePort(param,call_pg,dispId) { var adtxt=”; if(readCookie(‘nnmc’)){ if(call_pg == “2”) { pass_sec = 2; } else { pass_sec = 1; } var url = ‘//www.moneycontrol.com/mccode/common/saveWatchlist.php’; $ .ajax({url:url, type:”POST”, //data:{q_f:3,wSec:1,dispid:$ (‘input[name=sc_dispid_port]’).val()}, data:{q_f:3,wSec:pass_sec,dispid:dispId}, dataType:”json”, success:function(d) { //var accStr= ”; //$ .each(d.ac,function(i,v) //{ // accStr+=”+v.nm+”; //}); $ .each(d.data,function(i,v) { if(v.flg == ‘0’) { var modalContent = ‘Scheme added to your portfolio.’; var modalStatus = ‘success’; //if error, use ‘error’ $ (‘.mc-modal-content’).text(modalContent); $ (‘.mc-modal-wrap’).css(‘display’,’flex’); $ (‘.mc-modal’).addClass(modalStatus); //$ (‘#acc_sel_port’).html(accStr); //$ (‘#mcpcp_addportfolio .form_field, .form_btn’).removeClass(‘disabled’); //$ (‘#mcpcp_addportfolio .form_field input, .form_field select, .form_btn input’).attr(‘disabled’, false); // //if(call_pg == “2”) //{ // adtxt =’ Scheme added to your portfolio We recommend you add transactional details to evaluate your investment better. x‘; //} //else //{ // adtxt =’ Stock added to your portfolio We recommend you add transactional details to evaluate your investment better. x‘; //} //$ (‘#mcpcp_addprof_info’).css(‘background-color’,’#eeffc8′); //$ (‘#mcpcp_addprof_info’).html(adtxt); //$ (‘#mcpcp_addprof_info’).show(); glbbid=v.id; } }); } }); } else { AFTERLOGINCALLBACK = ‘pcSavePort(‘+param+’, ‘+call_pg+’, ‘+dispId+’)’; commonPopRHS(); /*work_div = 1; typparam = t; typparam1 = n; check_login_pop(1)*/ } } function commonPopRHS(e) { /*var t = ($ (window).height() – $ (“#” + e).height()) / 2 + $ (window).scrollTop(); var n = ($ (window).width() – $ (“#” + e).width()) / 2 + $ (window).scrollLeft(); $ (“#” + e).css({ position: “absolute”, top: t, left: n }); $ (“#lightbox_cb,#” + e).fadeIn(300); $ (“#lightbox_cb”).remove(); $ (“body”).append(”); $ (“#lightbox_cb”).css({ filter: “alpha(opacity=80)” }).fadeIn()*/ $ (“#myframe”).attr(‘src’,’https://accounts.moneycontrol.com/mclogin/?d=2′); $ (“#LoginModal”).modal(); } function overlay(n) { document.getElementById(‘back’).style.width = document.body.clientWidth + “px”; document.getElementById(‘back’).style.height = document.body.clientHeight +”px”; document.getElementById(‘back’).style.display = ‘block’; jQuery.fn.center = function () { this.css(“position”,”absolute”); var topPos = ($ (window).height() – this.height() ) / 2; this.css(“top”, -topPos).show().animate({‘top’:topPos},300); this.css(“left”, ( $ (window).width() – this.width() ) / 2); return this; } setTimeout(function(){$ (‘#backInner’+n).center()},100); } function closeoverlay(n){ document.getElementById(‘back’).style.display = ‘none’; document.getElementById(‘backInner’+n).style.display = ‘none’; } stk_str=”; stk.forEach(function (stkData,index){ if(index==0){ stk_str+=stkData.stockId.trim(); }else{ stk_str+=’,’+stkData.stockId.trim(); } }); $ .get(‘//www.moneycontrol.com/techmvc/mc_apis/stock_details/?sc_id=’+stk_str, function(data) { stk.forEach(function (stkData,index){ $ (‘#stock-name-‘+stkData.stockId.trim()+’-‘+article_id).text(data[stkData.stockId.trim()][‘nse’][‘shortname’]); }); });

Kotak Mahindra Bank share price rose in early trade on May 4 after the company reported its March quarter earnings.

The company posted a 32.8 percent year-on-year (YoY) growth in standalone profit at Rs 1,682.4 crore in the quarter ended March 2021.

Net interest income in Q4 FY21 grew by 8 percent to Rs 3,842.81 crore compared to the year-ago, with moderate 1.8 percent YoY growth in advances at Rs 2.23 lakh crore during the quarter.

However, the net interest margin contracted to 4.39 percent from 4.72 percent.

Also Read – Kotak Mahindra Bank Q4 profit jumps 33% to Rs 1,682.4 crore, provisions remain high

Here is what brokerages have to say about the stock and company after the March earnings:

HSBC | Rating: Reduce | Target: Rs 1,490

The gross NPAs remained broadly stable on QoQ basis, while loan growth recovered to positive territory.

Pressure was seen on term deposit growth. The strong capital & liquidity buffers are the positives. RoE could remain less than 12% by FY23.

Morgan Stanley | Rating: Equal-weight | Target: Cut to Rs 1,900 from Rs 2,025

The core PPoP growth was at 18% YoY, adjusted for one-time interest income reversals. The company reported steady asset quality and a strong performance by subsidiaries. We expect sustained earnings acceleration.

CLSA | Rating: Underperform | Target: Rs 1,850

The Q4 headline PPoP & PAT missed due to interest on interest reversal. The valuations are not cheap at current levels and we see better risk-reward in ICICI Bank & Axis Bank.

Credit Suisse | Rating: Neutral | Target: Rs 1,680

The growth picked up and credit costs also rose. The capital levels are strong (Tier-1 At 22%). The bank looking to accelerate growth and is open to inorganic opportunities. Rating is neutral as stock trades at 3.7x core P/B, for 13% RoE.

Sharekhan | Rating: Buy | Target: Rs 2,130

We value the bank on a standalone basis at 4.5x its FY2023E book value and its subsidiaries at Rs 490 per share. The bank’s strong operating metrics, prudent and agile leadership team, well-capitalised balance sheet, as well as the quality of its subsidiaries (formidable players in their own segments), provide long-term value to franchises.

Dolat Capital | Rating: Accumulate | Target: Rs 1,900

The company reported in line NII growth of 8% YoY, impacted by high slippages and few one-offs (previous quarter’s interest reversal, compound interest waiver of Rs 1.1 billion).

Operating profits benefitted from higher treasury gains and better fee lines, growing 25% YoY. Sequential loan growth of 4.5% YoY was driven by HL (10% QoQ) and SME (6-7%), CV/CE (9%), and agri loans (9%).

Motilal Oswal | Rating: Neutral | Target: Rs 1,900

The bank reported missed on our expectations, affected by elevated provisions and lower NII. Loan growth is showing signs of a revival, with a higher focus on Home loans. The bank continues to report steady progress in building a strong liability franchise, with the CASA ratio improving to 60% (highest in the industry).

Asset quality ratios stood stable on a sequential basis, while restructuring book stands limited at 0.19% of advances. The bank carries COVID-related provisions of Rs 12.8 billion (0.6% of advances), which provides us comfort, and estimate credit cost at 1% for FY22E (v/s 1.3% in FY21).

ICICI Direct | Rating: Buy | Target: Rs 2,040

The bank’s long term focus continues on maintaining risk-adjusted returns. Credit growth momentum has been maintained sequentially, which is a positive.

Recent RBI announcement of limiting MD & CEO term to 15 years may not impact the bank immediately as there is an adequate time of over 2.5 years for a smooth transition. Comfortable provision provides comfort regarding volatility in asset quality and, thus, earnings. Consistent performance over a period of time, healthy return ratios 2% RoA & 13% RoE with strong management are reasons for premium valuations.

LKP | Rating: Buy | Target: Rs 1,900

We expect the bank’s loan book to grow at a CAGR of 10% over FY21-23E. At CMP of Rs 1725, the stock is available at 4.4(x) standalone FY23E Adj. BVPS of Rs 396. Valuing the standalone entity with 4.8xFY23E BVPS; we arrive at a target price of Rs 1900. We recommend a buy rating with a potential upside of 10%.

At 09:21 hrs, Kotak Mahindra Bank was quoting at Rs 1,734.00, up Rs 9.70, or 0.56 percent on the BSE.

The share touched a 52-week high of Rs 2,048.95 and a 52-week low of Rs 1,110 on 16 February 2021 and 18 May 2020, respectively.

Currently, it is trading 15.37 percent below its 52-week high and 56.22 percent above its 52-week low.

Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.