Sharekhan Suggests Buying This Large Banking Stock, PAT Up 26% YoY At Rs. 2,071 Cr

Top brokerage firm Sharekhan, in a report, suggests investors buying the stocks of Kotak Mahindra Bank, which has reported PAT at Rs. 2,071 crore, up 26% YoY but down 25% QoQ.

Stock To Buy: Target Price, Current Market Price

The Current Market Price (CMP) of Kotak Mahindra Bank is Rs. 1,826. Sharekhan has estimated a Target Price for the stock at Rs. 2250. This stock has the potential to give 23.27% return, in the upcoming 1 year. This is a large-cap stock with a market capitalization of around Rs. 356,494 crore.

Stock Outlook
Current Market Price (CMP)	Rs. 1,826
Target Price	Rs. 2,250
Potential 1 year return	23.27%
52 week high share price	Rs. 2,253
52 week low share price	Rs. 1,626

Strong growth momentum witnessed in advances, which grew by 29% YoY/3% QoQ (higher than larger peers), led by retail and SME portfolio. Deposits grew by only 10% YoY due to lower CASA growth (6.6% YoY/-2.8% QoQ). Slippages were higher sequentially, almost double, at Rs. 1,435 crore versus Rs. 736 crore QoQ. However, out of the total slippages reported, Rs. 781 crore were upgraded during the same quarter. Asset quality improved on a QoQ basis, with GNPA and NNPA ratio declining by 10 bps and 2 bps QoQ to 2.24% and 0.62%, respectively.

Sharekhan: Should You Buy This Stock?

Maintaining the buy rating, Sharekhan said, "The bank is positioned well to grow exponentially after conservatively containing itself in the past with strong low-cost liability franchise and improving asset-quality matrix. The bank has higher capital buffers with strong low-cost liability franchise along with lower core credit cost scenario. We believe the bank is well positioned to benefit from the credit demand cycle with its calibrated growth stance, strong underwriting, assessment capabilities, and strong digitalisation capabilities adding to the moat to its business strength. Further, we expect its subsidiaries to contribute to consolidated earnings, as they gain scale and market share going forward. Key monitorable from here on would be succession plans of Mr. Uday Kotak who would retire by December 2023."

However, the key risks are economic slowdown can lead to slower loan growth and higher-than-anticipated credit cost.

Company profile: Kotak Mahindra Bank

Established in 1985, Kotak Mahindra Group (Group) is one of India's leading financial services conglomerate. The bank has a national footprint of 1,700 branches and 2,705 ATMs. The group offers a wide range of financial services that include commercial banking, stock broking, mutual funds, insurance, and investment banking. The group caters to diverse financial needs of both individuals and the corporate sector. The bank has a well-diversified pan India presence (~30% each in North, West, and South regions and 8% in Eastern India) and has one of the highest CASA ratios in the industry.

Disclaimer

The above stock was picked from the brokerage report of Sharekhan. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.