Sharekhan sees good times ahead for Kotak Mahindra Bank, while Motilal Oswal sees gains in buying the stock of SBI Life Insurance. Let's take a look at why these firms are optimistic on these stocks.
Buy SBI Life Insurance stock, says Motilal Oswal
According to Motilal Oswal, its recent interaction with the management indicates pick up in business momentum, with growth bouncing back strongly across all segments.
The management is aiming at healthy double-digit growth over FY22E (20-25%), which would be among the best in the past few years, the brokerage has said.
Also, according to the Motilal Oswal report, the agency channel has shown a strong bounce back and is contributing well to business growth. Strong momentum in high margin segments such as Annuity and Credit Life would aid further improvement in VNB margin (this margin indicates profits of a life insurer business).
"We estimate VNB to grow at 24% CAGR over FY21-24E, with operating RoEV to sustain by 18% by FY24E. SBI life Insurance is among our preferred picks in the Life Insurance space. We reiterate our Buy on the stock of SBI Life Insurance rating with a target price of Rs 1,400 per share (2.6x 1HFY24E EV)," the brokerage has stated.
Buy Kotak Mahindra Bank, says Sharekhan
According to Sharekhan, Kotak Mahindra Bank is well-positioned to grow at a healthy rate as credit demand picks up and as it has a clean balance sheet (capital adequacy of 24.7%; Tier I capital at 22.8%), strong liability franchise (industry leading CASA at 60.2%) and improving trend on asset quality side.
In Q2, the brokerage expects slippages to decline as collection efficiency improves. Consequently, GNPA ratio is expected to be at 3.3% in Q2, down from 3.56% in Q1. Net Interest Income is also likely to grow by 15% with better recoveries and an increase in credit growth during the quarter.
"We expect the bank's subsidiaries such as Kotak Securities and Kotak Asset Management to perform well amid a buoyant equity market. Valuations are attractive after adjusting for subsidiary valuations of Rs 571 per share. We retain a Buy rating on the stock with revised sum of the parts based price target of Rs 2,428 valuing the standalone bank at 4.5x FY23 book value," the brokerage has said.
Time to be cautious
Investors are also advised caution as the markets maybe overvalued at these levels. According to reports, stocks in India could be overvalued by 15 to 20%, based on historic price to earnings multiples for the Sensex and the Nifty companies. While we do pick investor brokerage reports for coverage, we also advise investors to invest in small amounts or to buy on declines as the best strategy. According to analysts there is a high possibility that the markets could consolidate at these levels as interest rates are also expected to trend higher.
The investment ideas are picked from the brokerage report of Sharekhan and Motilal Oswal. Investors should note that investing in stocks is risky and neither the author, nor Greynium nor the brokerage would be responsible for losses based on a decision from the above article.