Kotak Mahindra Bank shares: Stock price targets post Q4 results suggest limited upside ahead

Kotak Mahindra Bank March quarter results saw a beat on net interest income (NII), fees, opex and credit cost. Analysts said the private lender has been posting back-to-back strong results, but felt earnings might be peaking for the bank. Price targets for the stock stood roughly in the Rs 2,000-2,200, which suggests up to 14 per cent potential upside ahead.

Nuvama Institutional has raised its target on Kotak Mahindra Bank to Rs 2,140 from Rs 1,980 earlier but has retained its 'Hold' on the stock.

Growth in customer assets at 3 per cent sequentially is lower than peers due to weak corporate growth. Pressure on fixed-rate SA persists, it said.

"Earnings are strong and best-in-class, but have peaked in our view. With 79 per cent of its assets due to be repriced within a year, Kotak’s balance sheet is most sensitive to rates among peers. Furthermore, Its deposit franchise is not as strong as the other large three banks (HDFC Bank, ICICI and Axis)," it said.

Emkay Global said it has upgraded its earnings estimates for Kotak Mahindra Bank by 10-12 per cent for FY24 and FY25 and introduced FY26E estimates.

"We expect KMB's RoA/RoE to normalise to 2.1 per cent/13 per cent from the high of 2.4 per cent/14 per cent in FY23 due to the normalisation of margins/LLP. We have lowered our price to ABV multiple to 2.8 times FY25E ABV, factoring in the ensuing top management change, and retained our target at Rs 2,000," it said.

The private bank aspires to grow at 1.5-2 times of the nominal GDP on a sustainable basis. The trajectory of interest rate curve depends on monsoon. If monsoon is good, the management expects rates to moderate from H2FY24.

The bank is planning to add 150 branches in FY24 against 100 branches in FY23. Given the current situation, Kotak Mahindra Bank expects margins to be 5 per cent-plus for FY24.

Dolat Capital said post the recent upside, it has revised its rating downward to ‘Accumulate’ from ‘Buy’. Trading at 2.9 times standalone BV, the banks is valued at a premium to peers owing to its higher NIM and growth metrics, it said while suggesting a target of Rs 2,200 on the counter.

"KMB delivered a healthy quarter, with modest loan growth, strong NII, and controlled provisions. NIM expanded further, and the outlook remains buoyant, given the improving asset mix and a higher mix of floating loans," said Motilal Oswal Securities.

Yet this brokerage remained 'Neutral' on the stock with a price target of Rs 2,050.

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