Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us  
Google
Web www.equitybulls.com
Research

| More

Maintain REDUCE on Kotak Mahindra Bank - Strong profitability but growth remains elusive - HDFC Securities

Posted On: 2021-07-28 07:12:36 (Time Zone: UTC)


Mr. Krishnan ASV, Institutional Research Analyst, HDFC Securities and Mr. Deepak Shinde, Institutional Research Analyst, HDFC Securities

Kotak Mahindra Bank's (KMB) 1QFY22 performance was broadly in line with our estimates on the back of continued funding cost tailwinds resulting in sequentially stronger NIMs even as loans shrank 2.8% QoQ. Annualised slippages were up at 2.8% (FY21: 2.4%) as collections were affected during Apr- May'21 on account of the second wave (as witnessed by peers), with most of the stress emerging from secured retail portfolio. KMB maintained its stock of COVID provisions and the loan loss coverage at ~65%. We believe that current valuations factor in a high-quality franchise and best-in-class profitability (RoAs >1.8%) - however, we await growth catalysts (thus far elusive) before we can turn more constructive on the stock. Maintain REDUCE with an SOTP target price of INR 1,747 (standalone bank at INR1,378, 3.6x Mar'23 ABVPS).

Credit growth disappoints: KMB's loan book clocked a 2.8% de-growth QoQ - including credit substitutes, loan growth clocked in at +8.6% YoY. The management articulated its long-term target of growing in its segments of choice (commercial banking, SME and retail) while maintaining its risk-adjusted RoE. The bank disbursed INR 5bn of ECLGS during the quarter (total disbursements at INR 119bn, 5.5% of loan book). We expect loan growth of 12.6/14.6% in FY22/FY23E.

Hallmark - pristine asset quality: KMB reported marginally higher GNPAs at 3.6% (+30bps sequentially) as slippages clocked in at 2.8%, predominantly from secured retail portfolio (tractors, CV and CEs). The SMA-2 book increased to INR 4.3bn (20bps) from INR 1.1bn (5bps) in FY21, alongside a marginal increase in the restructured portfolio to 25bps of loans (Q4FY21: 19bps). We expect slippages of 1.7%/1.6% in FY22/FY23E. Credit costs clocked in at 1.4%, as the bank chose to maintain its stock of COVID provisions (INR 12.8bn, 0.6% of loans) and its loan loss coverage at 65%.

Subsidiaries disappoint; maintain REDUCE: KMB's consolidated profit was lower 30% sequentially (-2.5% YoY), primarily on account of loss in Kotak Life (consistent with the profit warning issued by the management earlier). Kotak Prime also reported lower PAT (-57% QoQ) as collections and disbursements continued to be impacted on account of the second wave. However, the operating performance of the AMC business, securities business, and investment banking business continued to remain robust. We believe that the current valuation (standalone bank at 3.6x Mar'23 ABVPS) factors in best-in-class profitability (RoAs >1.8%) - however, it is worth highlighting that these ratios appear optically better in a low-growth mode. We await growth catalysts (thus far elusive) before we can turn more constructive on the stock and maintain our REDUCE rating.

Shares of KOTAK MAHINDRA BANK LTD. was last trading in BSE at Rs. 1697.95 as compared to the previous close of Rs. 1740.4. The total number of shares traded during the day was 66798 in over 5312 trades.

The stock hit an intraday high of Rs. 1750.95 and intraday low of 1695. The net turnover during the day was Rs. 114519846.


Source: Equity Bulls

Click here to send ur comments or to feedback@equitybulls.com


Disclaimer:The article above is a gist / extract of the original report prepared by the research firm / brokerage firm. This article is not to be considered as an offer to sell or a solicitation to buy any securities. This article is meant for general information only. www.equitybulls.com, its employees or owners or the research firms, its employees or owners won't be responsible for any liability that may arise from information, errors or omissions in these articles. www.equitybulls.com or its employees or owners / the research firms or its employees or clients or owners may from time to time hold positions in securities referred in this article. For detailed research reports, please contact the concerned research firm directly.


Other Headlines:

Automobile Sector - Monthly Quick View - Aug'21 - Mixed Performance across Segments - Reliance Securities

Axis Securities initiating coverage on ICICI Securities

Company Update - Minda Corporation - Q1FY22 - ICICI Direct

Quant Pick - PVR Ltd - ICICI Direct

Quant Pick - ONGC - ICICI Direct

Peak in the headline wholesale inflation is behind us - WPI August 2021 - Acuité Ratings

Sansera Engineering - IPO - Strong Outlook with Steady Cash Flow - Reliance Securities

APL Apollo Tubes - Journey from a semi-commodity player to a branded one - HDFC Securities

Nazara Technologies Ltd - Upbeat in medium-term, Uncertain over Long-term - YES Securities

IPO Review - Sansera Engineering Ltd - ICICI Direct

Overall index is still 0.3% lower than the pre-pandemic levels - IIP July 2021

YES SECURITIES on Monthly General Insurance & Mutual Funds Data

India urban logistics spaces expected to cross 7 million sq. ft by 2022: JLL

Neogen Chemicals - Breaking into the next orbit with a bang - HDFC Securities

Gladiator Stocks - Bharti Airtel Ltd - ICICI Direct

Gladiator Stocks - V-Guard - ICICI Direct

Balkrishna Industries - Industry export growth accelerates - ICICI Securities

HDFC Life Insurance - Exide Life Acquisition - Maintain ADD - YES Securities

Gladiator Stocks - Grindwell Norton - ICICI Direct

Gladiator Stocks - Godrej Properties - ICICI Direct

Monthly Auto Volumes - August 2021 - ICICI Direct

Stock Tales - Easy Trip Planners - ICICI Direct

IPO Review - Vijaya Diagnostic Centre Ltd - ICICI Direct

AU Small Finance Bank - Attrition at top level remains key challenge; business momentum sustained in Jul/Aug'21 - ICICI Securities

Gladiator Stocks - State Bank of India - ICICI Direct

Gladiator Stocks - PNC Infratech - ICICI Direct

Vijaya Diagnostic Centre Ltd - IPO Note - YES Securities

Consumer Durables Sector - Lockdown mars performance yet again - Institutional Research Desk at HDFC Securities

75% of the employees today want to be in office at least once a week as compared to 52% in October 2020: JLL

Gladiator Stocks - Safari Industries - ICICI Direct

Gladiator Stocks - Interglobe Aviation - ICICI Direct

IPO Review - Ami Organics Ltd - ICICI Direct

Q1FY22 GDP - 31st Aug 2021 - Acuité Ratings & Research

Avanti Feeds - Higher input prices hurt margins - ICICI Securities

Company Update - Restructuring - Aarti Industries - ICICI Direct

Q1FY22 Company Update - MM Forgings - ICICI Direct

Company Update - Arvind Fashions - ICICI Direct

Zomato - Can margins and multiples surprise? - ICICI Securities

Ujjivan Small Finance Bank - Top management change and lumpy provisioning concern to weigh on valuation in near term - ICICI Securities

Bharat Dynamics - Guided missile systems to drive orderbook and profit growth - ICICI Securities

Economy - Continued accommodation necessary despite inflationary risks: MPC minutes - ICICI Securities

InterGlobe Aviation - Annual report analysis: Liquidity management remains the mainstay in anticipation of traffic recovery - ICICI Securities

General insurance - Health remains dominant growth driver; Strong all-round performance by Bajaj Allianz - ICICI Securities

Earnings Wrap Q1FY22: Resilient earnings, limited impact of second Covid wave - ICICI Direct

Fine Organic Industries Results Review - In-line performance - HDFC Securities

Power Plus Sector Update - July witnessed strong ~10% generation growth - HDFC Securities

Information Technology Sector Update - 'Hit Refresh' - HDFC Securities

Maintain ADD on JK Cement - Healthy performance - HDFC Securities

Maintain BUY on Star Cement - Margin recovers on pricing gain - HDFC Securities

Maintain BUY on Sadbhav Engineering - Long road to recovery - HDFC Securities


Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2020