Kotak Bank's Target Price Hiked By Analysts As They Say Structural Story Intact

Kotak Mahindra Bank Ltd.'s target price was raised by a few brokerages despite a slight miss in its July-September results, on the back of better earnings momentum and an improvement in the lender's subsidiaries' valuation.

Citi Research has hiked its target on the stock by 2% to Rs 1,940 apiece while maintaining its 'neutral' rating. The acquisition of Standard Chartered India's Rs 4,100 crore personal loan fits within the bank's risk framework and scale strategy as it will leverage its salaried, affluent customer base, the brokerage said.

Dolat Capital has also increased the target price on the stock by 3% to Rs 2,300 apiece, citing improvement in subsidiary valuations while maintaining its "buy" rating. The brokerage has tweaked earnings estimates, factoring in slightly lower growth and higher credit costs for the current financial year, offset by lower operating expenses.

Goldman Sachs has also hiked the target price by 2% to Rs 2,286 apiece as it believes that the stock is structurally well positioned with the liquidity cycle turning benign, leaving more room for market share and strong profitability. However, the brokerage has lowered its earnings estimates by 2% for the private sector bank in 2024-25 (April-March) and 2025-26, following the July-September earnings.

"We acknowledge that the stock could wait for peaking of asset quality pain before it structurally rerates, as we believe that the new management's articulation around growth and market share is quite encouraging," the brokerage firm said.

On the other hand, brokerage Nirmal Bang Equities believes that the stock is likely to see an overhang in the near to medium term due to the channels. Signs of stress building up in unsecured loan segments and its impact on growth and profitability, and 60% of the loan book being linked to the repo rate could also put pressure on margins in a declining interest rate scenario. Therefore, it has maintained its 'hold' rating on the stock.

Shares of Kotak Mahindra Bank were trading 2.94% lower at Rs 1,814.75 apiece, compared with 0.43% gains in the benchmark Sensex.