Kotak Bank share targets go up to Rs 2,515 but stock down 2%. Should you buy, sell or hold?

Although brokerages see the stock rallying up to Rs 2,513, investors were worried about the peaking of NIM (net interest margin) in the next few months. “Once policy rate hikes end in FY24, the downward repricing of loans would drag NIM,” Nuvama analyst Mahrukh Adajania said.

Investors, however, note that the lender delivered a healthy quarter, with modest loan growth, strong NII, and controlled provisions. “Asset quality remained robust, with a further decline in GNPA/NNPA, while the restructured book remained under control at ~0.22% of loans,” Motilal Oswal said.

The Q4 numbers were above expectations largely on account of high NII driven by margin expansion.

Among global brokerage firms, CLSA has downgraded the stock to outperform from buy with a target price of Rs 2,150. JP Morgan and Macquarie have neutral ratings with targets of Rs 2,070 and Rs 1,860, respectively.

Morgan Stanley sees it at Rs 2,215 while Goldman Sachs has a buy rating with a target price going as high as Rs 2,513 in the next 12 months. Jefferies has a 12-month target of Rs 2,400.

Here’s what brokerages say:

Motilal Oswal
We raise our earnings estimates by 7%/3% for FY24/25 and expect Kotak Mahindra Bank to deliver an RoA/RoE of 2.3%/13.8% in FY25. Reiterate neutral with a target price of Rs 2,050 (based on 3.0x Sep’24E BV and INR524 for its subsidiaries).

Nuvama
We argue NIM is near peak, and once policy rate hikes end in FY24, downward repricing of loans would drag NIM. At 79%, Kotak has the largest share of assets that reprice within a year. Kotak’s savings deposit franchise is weaker than large peers. Given its premium valuation and weak deposit franchise, we retain ‘HOLD/SN’.

Phillip Capital
We believe Kotak Bank would continue to command premium valuation given its potential high growth and pristine asset quality position. At CMP, the stock trades at 3.2x/2.7x of our FY24e/25e adj. BVPS of Rs 468/536. We maintain BUY rating with a revised target price to Rs 2,200 (Rs 2,100 earlier), implying 3.25x to FY25e ABVPS of Rs 536.

CLSA
Downgrade to outperform from buy. Growth is strong except in the corporate segment. It will remain a growth leader.

JM Financial
We believe Kotak’s focus on risk-adjusted underwriting has been its key strength over cycles and it continues to hold the bank in good stead. We like the bank’s growth stance (which could be aided by potential inorganic growth plays) and the next leg of valuation upsides will need clarity on succession, ability to further improve the liabilities franchise. We raise our FY24/FY25E EPS by 5/3%. Maintain BUY with a TP of Rs 2,080 valuing the core bank at 2.7x FY25E P/BV.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)