Hold Kotak Mahindra Bank, target price Rs 2000: Emkay Global

Hold Kotak Mahindra Bank, target price Rs 2000:  Emkay Global

Emkay Global has hold call on Kotak Mahindra Bank with a target price of Rs 2000. The current market price of Kotak Mahindra Bank Ltd. is Rs 1790.5.

Kotak Mahindra Bank Ltd., incorporated in the year 1985, is a banking company (having a market cap of Rs 355377.10 Crore).

The Bank reported a Gross Non Performing Assets (Gross NPAs) of Rs 5510.55 Crore (.00 % of total assets) and Net Non Performing Assets (Net NPAs) of Rs 1284.58 Crore (.00% of total assets). For the quarter ended 31-12-2020, the company reported a Consolidated Interest Income of Rs 5397.88 Crore, down -1.37 % from last quarter Interest Income of Rs 5473.08 Crore and down -12.90 % from last year same quarter Interest Income of Rs 6197.23 Crore. The bank reported net profit after tax of Rs 2575.74 Crore in latest quarter.

Investment Rationale
The brokerage expects the bank to deliver superior RoA around 2.1% in FY23, up from 1.8% in FY20, led by better margins, contained opex and moderation in LLP. However, RoE still looks optically depress at 13%, which would be higher at 17% after adjusting excess Tier I capital over & above new optimal for large private banks in uncertain times (~15%). It retains Hold with a TP to Rs 2,000, based on 4.1x core P/ABV FY23 and subs valuation of Rs452. Key risks to call: Higher-than-expected NPA formation mainly in retail/SME book, failure to deliver on growth and management attrition.

Promoter/FII Holdings
Promoters held 26.1 per cent stake in the company as of Sept 30, 2020, while FIIs held 42.2 per cent, DIIs 15.3 per cent and public and others 16.5 per cent.

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