Dolat Capital Maintains 'Buy' Rating On Kotak Mahindra Bank After Q2 Results

Dolat Capital Report

Kotak Mahindra Bank Ltd. reported in-line operating metrics with net interest income growth of 12% YoY, net interest margin of 4.9% (-10 bps QoQ), and pre-provision operating profit growth of 10% YoY. Slippage increased to 1.9%, driven by higher credit card delinquencies.

The sequential decline in PCR to 71% (-400 bps), however, helped limit credit costs at 65 bps, with in-line PAT and RoA at 2.2%.

Retail unsecured book was flattish QoQ, owing to full impact of RBI order and de-growth in MFI book, which affected NIM by 11bps.

30- 35% of slippages were from cards book. Credit costs are expected to be stable in the near term and moderate thereafter. Additionally, the bank slowed down earlier in MFI lending and does not foresee any stress from PL portfolio.

We tweak earnings, factoring slightly lower growth and higher credit costs for FY25E, offset by lower opex.

Maintain ‘Buy’ rating with revised target price of Rs 2300 (from Rs 2230 earlier) valuing the standalone bank at 2.4 times Sep-26E adjusted book value (3.4x including subs). Rise in target price is mostly driven by improved subsidiary valuations.

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