KR Choksey has given Buy recommendation for Kotak Mahindra Bank with a target price of Rs. 2590 in its research report issued on Oct 28, 2021

KR Choksey’s research report on Kotak Mahindra Bank

Net Interest Income (NII) for Q2FY22 increased to INR 4,021 Cr, up 3%. Net Interest Margin (NIM) for Q2FY22 was at 4.45%. Operating profit for Q2FY22 was INR 3,120 Cr, from INR 3,297 Cr in Q2FY21. The Bank’s PAT for Q2FY22 increased to INR 2,032 Cr, up 24% from INR 1,642 Cr for Q1FY22 (INR 2,184 Cr for Q2FY21). Advances increased by 15% to INR 234,965 Cr as on September 30, 2021 from INR 204,845 Cr as on September 30, 2020 (INR 217,465 Cr as on June 30, 2021). As on September 30, 2021, GNPA was 3.19% & NNPA was 1.06%. Credit cost on advances was 63 bps (annualized) for Q2FY22 (133 bps for Q1FY22). Capital adequacy ratio of the Bank as per Basel III as of September 30, 2021 was 21.8% and Tier I ratio was 20.8%.

Outlook

We have applied P/ABV multiple of 5.0x to its FY24E adj. BVPS of INR 467 to value the standalone business of the bank and we value its subsidiaries at INR 253 per share, yielding a target price of INR 2,590 per share, giving an upside of 18.7% over the CMP. We maintain our “BUY” recommendation on the shares of KMB.

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